The Gems and Jewellery sector has a reason to cheer after Finance Minister Nirmala Sitharaman considered most of their stated demands in her Union Budget. The Finance Minister reduced customs duty on cut and polished diamonds and gemstones to bring it to 5 per cent from 7.5 per cent.
Notably, the Gems and Jewellery Export Promotion Council (GJEPC), along with Gems and Jewellery Federation (GJF) and India Bullion and Jewellers Association (IBJA) had recommended customs duty reduction to 2.5 per cent. On sawn diamonds, responding to the trade’s demand for a clarity, the Finance Minister stated that it would “attract nil customs duty”.
Somasundaram PR, Regional CEO, India at World Gold Council, welcomed the Budget and stated that the emphasis on exports was evident with the announcement of a simplified regulatory framework to allow the e-commerce export of jewellery.
“The general policy thrust aimed at higher economic growth is again a tangible benefit for gold, as it is well established that income growth is the single dominant factor in long term gold demand,” he said. “Definitely one more reason for industry to cheer after the high five for gold in Q4 by customers,” he added.
Speaking to Businessline on the Budget provisions for the sector, Dinesh Navadia, Regional Chairman - Gujarat, GJEPC, said, “This time, the government has paid adequate attention towards this sector. We have also shown our performance with robust exports. Right now the gems and jewellery sector is having one of its best times. All factors are supportive, US, Hong Kong and Middle East markets are also opening up with strong demand.”
Gold import duty
Haresh Acharya, Director, IBJA, said, “There was a duty cut of 2.5 per cent on gold. This year India’s gold imports is crossing 1,000 tonnes — one of the highest in past 4-5 years. So, there was no case for a reduction in customs duty on gold.”
In order to further boost export of jewellery through e-commerce, the Budget also proposes a simplified regulatory framework which will be implemented by June this year. Further, the customs duty on pearls 7101 and rhodium imports has been reduced to 5 per cent and 2.5 per cent respectively as against previous rates of 10 per cent and 12.5 per cent respectively.
In order to “disincentivise import of undervalued imitation jewellery,” customs duty on imitation jewellery was fixed in a manner that a duty of at least “₹400 per kg” is paid on its import.
Meanwhile, there are also concerns whether there will be an impact on gold investment demand following the government’s recognition to the digital currency. The trade, however, sees no such threat on gold demand as cost of holding gold is lesser as compared to digital assets, which will now attract 30 per cent tax on each transaction. “On the contrary, this may be a positive for gold investment demand,” said Acharya.