Excise duty of one per cent on unbranded jewellery is likely to hit the industry in the State hard especially in view of the competitive pricing on making charges.
In addition, the Budget 2012 also proposes to levy a one per cent tax collection at source on cash sales of bullion and jewellery in excess of Rs 2 lakh.
Gold had emerged as a preferred investment option given the fall in real estate prices, says Mr Sherry Oommen.
The related increase in tax costs coupled with the doubling of the customs duties on standard and non-standard gold bars do not augur well for the State.
Mr Oommen told Business Line that this could potentially lead to proliferation of an alternate market resulting in the risk of smuggling of gold.
This could in turn precipitate a fall in revenues of the organised sector and a drop in income-taxes, further worsening the fiscal deficit numbers. During the 12{+t}{+h} Plan period, investment in infrastructure is expected to go up to Rs 5 lakh crore, Mr Oommen pointed out.
Half of this is expected to be generated from private sector, which is expected to increase opportunities for construction companies in the State.
Mr Oommen also cited Government's stance on overruling some of the key judicial pronouncements, which is unlikely to boost foreign direct investment into the State.