Gems and jewellery industry welcomes Budget announcement to cut import duty to 7.5%

By Suneeta Kaul

The gems and jewellery industry has welcomed Union Finance Minister Nirmala Sitharaman’s Budget 2021-2022 announcement to cut import duty on gold and silver to 7.5 per cent from the prevailing rate of 12.5 per cent.

However, there will be a 2.5% Agriculture Infrastructure and Development Cess (AIDC) imposed on imports of both the metals; AIDC is a new cess that has been introduced in the 2021 Budget. There will also be a social welfare cess of 0.75%, taking the overall duty to 10.75%.

Gold dore bars and silver dore bars will attract customs duty of 6.9% and 6.1%, respectively, as opposed to the existing rates of 11.85% and 11%, respectively. Customs duty on gold and silver findings will be halved to 10% from the current 20%. Moreover, the duty on platinum has been cut to 10% from the prevailing 12.5%. Precious metal coins will also attract a duty of only 10% from the earlier 12.5%.

Industry leaders say the move will give a boost to the sector, and, at the same time, make exports more competitive globally. The duty cut is also expected to curb the smuggling of gold into the country. Besides, gold and silver jewellery is set to become cheaper ahead of the upcoming wedding season.

According to the World Gold Council, domestic demand for gold declined by 35% to 446.4 tonnes in 2020, as against 690.4 tonnes in 2019, while the total demand for jewellery fell by 42%, owing to the Covid pandemic and record high prices.

Here’s a snapshot of what industry leaders had to say about the Budget announcements pertaining to the gems and jewellery sector.

Somasundaram PR, Managing Director, World Gold Council, India

Overall the Budget will lead to positive outcomes for the industry. The rationalisation of import duty on gold to around 10.75 per cent from 12.5 per cent is a welcome move and timely. Hopefully, this is the first in a series of such cuts to make bullion an asset class that operates mainstream. It is a much-needed incentive for the organised and compliant players in the bullion and gold jewellery market. A rationalised duty structure and simplified processes are fundamental to an organised trading market. Rural welfare schemes announced by the government to boost consumer sentiment will set the consumption cycles in motion and help the jewellery retailers as well.

Ashish Pethe, Chairman, All India Gem & Jewellery Domestic Council (GJC)

The jewellery industry is thankful to the Finance Ministry for reducing the import duty on gold and silver. This is a welcome decision made by the government and it will surely provide immense relief to the jewellers and end-consumers. Appointment of SEBI as the Regulatory for Gold Exchange is also a welcome step. However, the gold monetisation scheme needs to be simplified, so that large quantities of idle gold lying in households can be better utilised for the nation. That way, reliance on imports can be cut. The GJC will continue to press for a reduction in GST rates.

Colin Shah, Chairman, Gem & Jewellery Export Promotion Council (GJEPC)

We sincerely thank the Hon’ble Finance Minister Smt Nirmala Sitharaman for considering industry’s recommendation to reduce the basic custom duty on precious metals such as gold and silver. The reduction in duty from 12.5% to 7.5% will help gem and jewellery exports become globally competitive. High duty on precious metals had made our exports uncompetitive, leading to the large Indian diaspora/NRIs moving to Dubai, Hong Kong, or other centres, to buy jewellery. This was impacting employment and the overall business in India. The FM has also announced the setting up of a new SEBI-regulated gold exchange. We welcome the move, as this will surely ease marketability and sale of gold.

 Vaishali Banerjee, Managing Director, Platinum Guild International (PGI) – India

The Budget presented by the Finance Ministry, will lead to positive outcomes for the jewellery industry. It is heartening to see that the import duty on platinum has been reduced to 10%, which is a welcome decision made by the government. This will boost consumer sentiment and, in turn demand, benefiting both the industry and the consumers as the market recovers in 2021. We look forward to a year of a strong recovery.

Suvankar Sen, Executive Director, Senco Gold and Diamonds

The duty reduction is a good initiative and a support by government to reduce unofficial smuggling. It will help the sector to be more organized. The responsibility of SEBI to manage bullion exchange implementation will help in making the gem and jewellery sector more organized. It is a good initiative by the government to take care of consumers, companies, and the manufacturing sector, as well as the karigars.

Sachin Jain, Managing Director, De Beers India

Import duty reduction on gold and silver from 12.5% to 7.5% is a step in the right direction, and will boost the diamond, gems and jewellery sector. As a result of this cut, prices of precious metals will fall, which, in turn, will spur demand and footfalls into the retail/online stores. As we did not see any drastic increase in taxes, the demand for precious diamonds, gems and jewellery will continue to be strong among consumers. Overall, the budget announcement for the sector has struck an optimistic chord in the new year.

Sunil Nayak, CEO, Reliance Jewels

Overall, the Budget has been very encouraging for the economy and the jewellery industry at large, with clear direction towards structural reforms. Strategic reforms will drive consumption across industries and will expand the GDP. Specially for the Jewellery Industry, the drop in basic custom duty on gold and silver from 12.5% to 7.5%, and the introduction of AIDC (Agricultural Infrastructure and Development Cess) of 2.5%, effectively sets it at 10% (including Social Welfare cess). It is a welcome decision made by the Government, and will provide relief to both jewellers and end-consumers, since the effective price of bullion will reduce overall consumer price. Further, this is an added advantage to the organised and compliant players in the industry. We can expect the industry to see higher consumer demand and increase consumer confidence.

Prithviraj Kothari, Managing Director, RiddhiSiddhi Bullions Ltd

It is a good Budget. The customs duty on precious metals has been reduced, which was the need of the hour. The duty has been cut not only on gold and silver (to 7.5% from 12.5%), but also platinum (to 10% from 12.5%). Besides, dore bars will also attract a lower duty now. These steps will reduce the smuggling of gold, and provide an overall boost to the sector. Overall, the Budget is good and people are happy.

K Srinivasan, Managing Director, Emerald Jewel

The budget has been overall good for the gems and jewellery industry. The reduction of customs duty to 7.5% from 12.5% will boost demand for gold and silver in the country. Besides, it will curb gold smuggling, and make the sector more organized. The proposal to set up a SEBI-managed bullion exchange is also a good move. We hope the government will address the remaining concerns of the industry.

Courtesy: Retail Jeweller India News Service