Jewellery firms may lose sheen

Jewellery company stocks may see hectic trading after the imposition of the new levy introduced in the Budget. The Customs duty on gold bars of not less than point 995 fineness has been increased from two per cent to four per cent on the value of import. Unbranded gold jewellery has also been covered under central excise of one per cent. In addition, deduction of tax at source has been proposed for cash purchase of jewellery above Rs two lakh. The Finance Minister has also levied a two per cent import duty on coloured gems stones – on the lines of cut and polished diamonds – to curb round-tripping or illegal repeated exports and imports of gems. The mark up in customs and excise duties will mean an increase of about Rs 825 for 10 grams of jewellery, based on the current gold prices. The new levy comes at a time when the industry has been demanding to do away with excise duty on branded jewellery. The rising gold prices have already suppressed domestic demand. With rising operational cost and falling demand, the profitability of jewellery companies may be adversely impacted. Jewellery companies also spend a huge sum on advertisement and promotional activities. Some of the listed jewellery stocks such as Gitanjali Gems, Rajesh Exports, Shree Ganesh Jewellers, Suraj Diamonds and Thangamayil Jewellery may come under selling pressure.