Higher duties to boost gold trade but take sheen off polished diamonds

India’s gold trade will glitter with higher protection against imported jewellery, but increased levy on cut and polished diamonds, used in studded ornaments, is a setback for the gems and jewellery industry.

A mixed reaction followed the government’s decision late on Wednesday to raise the import duty on cut and polished diamonds to 7.5% from 5% and that on gold jewellery and its parts to 20% from 15%. Duty on the yellow metals remains unchanged at 10%.

These were among 19 ‘non-essential’ items on which the levies were hiked to discourage imports. The measure is aimed at reducing the country’s wide current account deficit, which is weighing on the rupee.

Gem & Jewellery Export Promotion Council executive director Sabyasachi Ray said this posed a tough situation to the diamond trade.

“The hike in the duty of cut and polished diamonds will have a major blow on trading volumes of these diamonds. Indian manufacturers bring large large-sized cut and polished diamonds from Israel which are used in studded gold jewellery and are exported. That will completely come to an end as a high duty of 7.5% is not a workable one,” Ray told ET.

In FY18, India imported Rs 14,407 crore worth of cut and polished diamonds. In the first five months of current fiscal year, imports declined 38% from a year earlier to Rs 4,112.36 crore. However, the diamond trade feels the government’s move to increase import duty on lab grown diamonds from 5% to 7.5% is a welcome move as it will slow down movement of this category of diamonds and help the trade promote natural diamonds among Indian consumers.

To gold trade, the increase in customs duty on gold jewellery and its parts has brought much cheer. Surendra Mehta, secretary of the India Bullion & Jewellers Association, said, “India imports jewellery from the UAE, Turkey, Italy, Switzerland and Singapore. Gold jewellery imports annually is around Rs 10,000 crore.” Silver jewellery imports is negligible and is around Rs 11-12 crore a year.

Mehta said, “This is a welcome move to increase duty on readymade jewellery and jewellery parts. This will, in fact, help government’s ‘Make in India’ drive to become more successful as Indian jewellers will have the chance to churn out more gold jewellery. The government has kept the import duty on gold at 10% and increased the duty on imported gold jewellery to 20% which will surely help the domestic manufacturers.” India annually imports 800-850 tonnes of gold, valued at Rs 2 lakh crore.

Courtesy: Economic Times/ Image: Exporters India.com