In a bid to promote the growth of the jewellery sector, the Gems and Jewellery Export Promotion Council (GJEPC) has suggested the introduction of a repair policy, and insisted on a cut in the import duty on gold and silver; and the abolition of the equalisation levy of 2 per cent for the purchase of rough diamonds.
Colin Shah, Chairman, GJEPC expressed confidence that with the support of the government, the sector will achieve its target of USD 70 billion in the coming years.
The current import duty on gold and silver is 10% plus 3% GST. A consumer pays a total of 13% tax on the gold they purchase. The plea is to reduce the import duty to 4% and retain the 3% GST. The demand to revise the duty is aimed at bringing stability to the industry. During the last Union Budget meeting, the government reduced the import duty from 12.5% to 10%, but the jewellers have requested to reduce it further.
To address the issue, Vibes of India invited Shanti Patel, President, Gem & Jewellery Trade Council and Jigar Soni, Vice President, Jewellery Association Ahmedabad for a conversation on the plea to reduce the import duty and other concerns of jewellers.
Excerpts from the conversation:
Is gold smuggling increasing due to higher import duty?
The price of gold in India is higher compared to neighbouring countries such as Dubai. This often leads to gold smuggling where people are tempted to sneak gold to India and sell it at higher prices. Patel said, “If the import duty is reduced, the first impact will be a reduction in gold smuggling. If the gold prices of India are at par with international standards then people will be encouraged to buy gold from India. This will eventually lead to more employment opportunities and better revenue for the country. This will also help the jewellery industry thrive.”
“Another difference between gold and silver jewellery in India and abroad is the craftsmanship. Indian jewellery is handcrafted while the ones in Dubai are machine-made. In Gujarat, the number of local craftsmen is reducing at an alarming rate. If the employment opportunities get better, it might save the dying art of gold craftsmanship.” added Patel.
Inspector raaj returns with a hallmark process
On Aug 23, jewellers went on strike against the amended gold hallmarking policy. Soni said, “Earlier also they (hallmarking centres) would take one jewellery from a lot and would scrub, cut, melt the metal to ascertain its purity. In the new Hallmarking Unique ID (HUID) that process remains the same but the jeweller needs to put the weight and the detail of each item in the portal and then send it to the hallmark centre. That is one lengthy process.”
The hallmarking system is in practice for over 20 years but the recent amendment has pinched jewellers. “More than checking the purity of the items, this is just an administrative process. It takes about 4-5 days which has slowed down the hallmarking process. It feels as if the inspector raaj is back, tanashahi of babus is back.”
Hallmarking centres are far and few. The computerised system of hallmarking will be an inconvenience to rural jewellers who have no technological help. They will also have to travel to nearby cities with their gold jewellery to get it hallmarked and that’s another hustle.
Bullion merchants reduced by 15%
Bullion merchants import gold in larger quantities than jewellers, they bear higher risk, huge investment and get lesser margins on it due to the Tax Deducted at Source (TDS), Tax Collected at Source (TCS) and the high import duty. There are over 250 bullion merchants in Ahmedabad and their rate is fast reducing due to the burden of tax and low margin of profits. They deal in the business of Rs 5 crore to over Rs 200 crore and these merchants have reduced by 15% due to adverse business conditions.
“The bullion merchants of Manek Chowk or of Ahmedabad, in general, are either diverting their business or leaving it. Higher rate of import duty and added taxes leave nothing for them to earn,” Patel said.
Another concern Patel emphasised was the lack of financial support from government banks. “Even if we register ourselves in the MSME sector, we get no financial support from banks. We don’t even get loans to run our business. While the textile, pharma or chemical industry gets the needed financial help, we miss out on it completely. That’s another injustice to our sector.”