Gems and Jewellery Industry rebuffs the Import Duty hike on gold and other precious metals

The Union Budget 2019 has hiked import duty on gold and other precious metals that are imported to 12.5%, from current level of 10%. The decision came at a time when the domestic jewellery industry and commerce industry were demanding a cut in the import duty. All India Gem & Jewellery Domestic Council (GJC) along with Gem & Jewellery Export Promotion Council (GJEPC) and India Bullion and Jewellers Association (IBJA) representing the Gems and Jewellery industry plans to meet Finance Minister Nirmala Sitharaman to demand a roll back.

Giving his reaction on the budget, Anantha Padmanabhan, Chairman, GJC said, “The industry is disappointed with the budget. We were expecting for a reduction in imports duty from 10% to 6 or 4 per cent but the increment came as a huge setback. Smuggling lobby will become stronger. All the retailers through our Labham Programme have been falling under compliant but now they will go to the grey market. We have decided to jointly represent with GJEPC and IBJA for a roll back. Already gold prices have gone up and now this 2.5 per cent will further increase the rate affecting the sales to come down by 30 to 40 per cent immediately.”

Pramod Kumar Agrawal, Chairman, GJEPC, said, “The gem & jewellery industry is going through very tough times with decline in exports and job losses and the industry expected some positive announcement as encouragement to our sector. Instead the increase of import duty will result in growth of business in neighbouring countries as the foreign tourists will stop buying jewellery from India, and processing of larger diamonds will shift to competing countries such as China and Vietnam. GJEPC will continue to work with the Government to get favourable relief for the sector in terms of duty and ease of doing business at transaction level.”

Echoing the same views, Somasundaram PR, Managing Director, India, World Gold Council said “Import duty hike on gold from 10% to 12.5% will negatively impact India’s gold industry. This will impede efforts to make gold as an asset class particularly when gold prices are already rising globally. In addition, the grey market will thrive which will dilute efforts to reduce cash transactions.”

“An increase in duty will be counterproductive to the objectives stated in the previous year’s budget and encapsulated in NITI Aayog’s recommendations for transforming the gold market. We believe that gold can play a positive role in the Indian economy, but to enable this; there needs to be a reduction in overall taxes, a stable policy environment and a transparent trading market,” he further added.

Tanya Rastogi, Director of IBJA, from Lala Jugal Kishore Jewellers commented that, “The increase in duty from already high import duty in comparison to most other countries, is a substantial blow to the industry. The entire budget has increased the burden on the tax payers including the middle class without any rewards in return. Millions of Indians buy gold as a long-term investment to protect their wealth and gold also has huge significance socially, emotionally and economically in India, which the government seems to have not taken into consideration.”

Snehal Choksey, Director, Shobha Shringar Jewellers remarks, “The Jewellery industry has been already experiencing a slacky market and increase in custom duty by 2.5% is yet another setback for the jewellers. Over and above, there is an increase in corporate Tax for companies with income above 2 crores by additional 3% and increase of 7% tax on companies with income above 5 crores. The budget isn’t a positive one for the industry.”

Shreyansh Kapoor, Vice President, Kashi Jewellers said, “India is one of the largest gold importers in the world. This budget will lead to a huge surge in gold prices and make it inaccessible to larger population of India. It would also encourage parallel trade as there is a huge difference between international and Indian rates resulting in a buyer preferring international markets over us.”

Mr Jignesh Mehta, Founder & Managing Director, Divine Solitaires said “It has been a good budget for the overall economy. There have been some very positive moves that the government has taken for our economy. However, the gems and jewellery sector has been largely ignored. The increase in import duty will encourage unorganised businesses as the motivation for illegal transactions will increase.”

Giving a different perspective, Saurabh Gadgil, CMD, PNG Jewellers; Director and National Vice President, IBJA says that, “The imposition of a hike in customs duty on gold and precious metals will have a dampening effect on the market. However, the push for digitalisation and the shift to a cashless economy will strengthen the hand of organised players in the industry, creating transparency and positively impact market sentiment. The introduction of zero tax liability for those in Rs 5 lakh income bracket will also align with our expansion in Tier-II and Tier-III markets, and augurs well for the industry as a whole. 

Courtesy: Neha Taneja Malik

Image Courtesy: Financial Express