Kolkata: With gold smuggling on the rise and the price of the precious metal skyrocketing to Rs 63,000 per 10 gm, the Indian jewellery segment hopes that Union Finance Minister Nirmala Sitharaman will reduce import duty on gold, which is denting retail sales. Currently, the basic import duty on gold is about 12.5% and an additional 2.5% has to be given as agricultural infrastructure cess. In addition, there is a Goods & Services Tax (GST) of 3%.
The industry wants the import duty to be brought down to 4% so that sales can go up in the ongoing wedding season and also the entry of gold through the grey route can be controlled. Higher duty on gold encourages the smuggling of gold into the country. According to industry estimates around 100 -120 tonnes of gold enter the country through the illegal route.
"The organised jewellery retail segment is growing at a steady pace, thanks to regulatory reforms such as the mandatory hallmarking of gold jewellery and GST. However, to unlock the potential of the organised jewellery retail segment, the budget needs to propose a reduction in the import duty on gold. A higher gold import duty is detrimental to the growth of the organised jewellery retail sector, as it indirectly promotes gold smuggling and unauthorised grey market transactions,” said MP Ahammed, chairman of Malabar Gold & Diamonds.
The budget also needs to propose measures to control unaccounted business practices by implementing effective tax compliance and transparency mechanisms. The interim budget should also propose measures to create a broader pathway for growth for the organised jewellery retail segment, the Malabar Group chief feels.
An infrastructure boost by the Budget can ensure that raw materials are available at the most competitive prices. This can be possible if the GIFT City in Ahmedabad allows the international gold suppliers to supply to the Indian manufacturers at a competitive price. More importantly, the availability of gold in the form of gold loans at very competitive pricing is the need of the hour. This move will allow gold companies to make the business more competitive.
“While we have the inherent ability to manufacture for the world, the Budget needs to ensure a continuous focus on skill development. Artisans need to update themselves with the international standards of manufacturing. And if any machinery is procured, like the way we have been buying in SEZs, in which we get certain duty benefits, we should be able to import such machinery at lower duties and get government support and subsidies. Budget measures will thus ensure India’s capacity of manufacturing is fully utilised even during the lean seasons of the global market demand,” said Suvankar Sen, Managing Director of Senco Gold & Diamonds.
Budget can also look into providing special finance to help Indian brands and manufacturers establish businesses outside. That would help further to take the brand ‘Made in India’ to the global stage. Finally, being one of the largest exporters of gems and jewellery, the industry is contributing to a major portion of the country’s total foreign exchange reserves. If the Budget can support manufacturers in terms of cost of capital or capex, then that will play a big role and provide a boost for various players, to take steps to improve their reach across the world, Sen said.
Brands can thus reach out not only to the Indian diaspora but to other communities. “The government via budgetary steps must support the industry with new technologies - be it AI, Lab-grown diamonds or the latest machinery. Lastly, to boost liquidity and exports in the Jewellery Industry, if the government reduces the customs duty for releasing margin money with banks, it will be helpful for the industry,” added the Senco Gold & Diamonds Managing Director.
