Demand will dip and buyers have to pay more to buy jewellery from April as sellers will pass on the doubling of customs duty to 4% and a 1% excise duty on unbranded jewellery proposed in the Budget.
?This excise duty will directly increase the input cost of gold procured by us and, therefore, lead to a rise in the cost of jewellery, which will need to be absorbed or passed on to the consumer,? said Sandeep Kulhalli, vice-president, retail and marketing, Tanishq, the jewellery division of Titan Industries.
Hike in customs duty and excise would mean an increase of about R825 for 10 gm from now. On Monday, 10 gm gold was quoted at R28,540 on the benchmark Multi Commodities Exchange index.
Demand could fall anywhere between 15% and 20% during the 9-month non-festive season that falls outside the October-December bracket, say jewellery associations, gold manufacturers and retailers, who have shut shops across the country over the past three days in protest against the hikes announced in the Budget on Friday. Traditionally, gold sales peak between October and December every year.
?The interest in buying gold jewellery and gold bars will go down with consumers having to pay more duties,? said Rajiv Jain, chairman of the Gems and Jewellery Export Promotion Council (GJEPC). ?This will dissuade them from purchasing jewellery.?
?The excise on unbranded jewellery is unnecessary and will impact volumes,? said Mehul Choksi, chairman and managing director of Gitanjali Gems, one of the leading jewellers of the country.
Gold exporters are expecting a rollback. ?I appeal to the government to roll back the increase in duty on gold imports and exempt unbranded gold jewellery from central excise duty,? said Rajesh Mehta, chairman, Rajesh Exports. ?The organised jewellery industry would suffer heavily because of this duty.?
However, consultants and tax experts say the hike will not have much impact as gold is regarded as an investment rather than an expenditure.
?Gold prices go up 20-30% every year, but in India gold buying never stops,? said Santosh Dalvi, tax expert at audit and consulting firm KPMG India.
?The average ticket price for gold is so high that a 1-2% increase isn?t very big in absolute terms.? For many retailers, high volatility in gold prices has had a nominal impact on sales in the past one year. Consumers will also benefit from the excise exemption on branded silver jewellery, said Jain of GJEPC.
The increase in customs duty on gold will make it relatively less lucrative and divert the flow of funds, especially household savings, to capital markets, Confederation of Indian Industry president B Muthuraman said.