It’s the annual budget time (February end) in India and the country’s gem & jewellery (G&J) industry is once again expecting some ‘booster dose’ from government to improve its health which has been ailing since a couple of years. Mr. Praveenshankar Pandya, Chairman of India’s Gem & Jewellery Export Promotion Council (GJEPC) along with some industry leaders had a meeting with the Finance Minister (FM) Mr. Arun Jaitley recently during which the delegation briefed the FM about the deteriorating health of the industry and requested him to declare some measures to bring the industry back on track.
The recurring slowdown in global markets has badly impacted India’s gem & jewellery exports. The latest import-export figures declared by GJEPC indicate that the exports of polished diamonds in December 2015 came down by 17.1% at USD1.20 billion as compared to USD1.50 billion in the same month previous year.
However, rough diamond imports during the month increased by 2.44% at USD1.46 billion, slightly up by 2.44% in value terms from USD 1.43 billion the previous December.
Exports of cut and polished diamonds went down by 14.63% to USD14.79 billion this year and imports of rough diamonds collapsed to $10.12 billion this year, indicating a decline of 23.97%. Gold jewellery (studded and plain) exports were down by 22.91% to USD6.20 billion in the first nine months of financial year of 2016, while that of medallions and coins to USD3.70 billion.
The delegation urged the FM to introduce Special Turnover Tax for the diamond industry with 0.75% tax on sales turnover (computing net income as 2.5% of the turnover, available till 6% of income). This system already exists in countries like Belgium and Israel. The measure, if implemented, would be tax neutral and encourage companies in Belgium and Dubai, especially those run by NRIs to shift capital to India, in addition to enhancing the country’s exports.
Mr. Pandya also requested Mr. Jaitley to permit the sale of rough diamonds through the Special Notified Zone (SNZ) already established in Mumbai by implementing a 0.25% tax on sales turnover achieved at the SNZ by foreign mining companies. This, he explained, would generate a new area of tax collection by shifting such sales from Belgium, Israel and Dubai.
The chairman also impressed upon the government to include the gems and jewellery sector under the Interest Subvention Scheme and Merchandise Exports from India Scheme (MEIS). He emphasized that the gold jewellery sector had a huge potential suggesting that the country’s jewellers should be involved under the government’s Gold Monetization Scheme (GMS). He also said that the current 2% difference between import duty on gold dore bars and gold bars was too high and suggested it should be brought down to 0.25%.
On the other hand, Mr. Bachhraj Bamalwa, Director of All India Gems and jewellery Trade Federation (GJF) is optimistic about the prevailing conditions over India’s domestic market. In fact he feels that the exports will also pick-up in a few months from now. “Our gems and jewellery exports may be down by 15-16%, but we are expecting fast global recovery. Our major export market is the US and its economy has shown some positive signs of recovery. So we expect some revival within a few months from now. Performance of our domestic sector is satisfactory. As soon as we see some revival in the global economy, even at a snail’s pace, our exports as well as domestic industry will pick up well,” he says.
So all eyes are now set on the ensuing budget from where the Indian industry may get some support from the government.
Posted by Suresh Chotai