The gems and jewellery industry on Wednesday said it is disappointed with the Union Budget proposed for 2023-24, as the government maintains the customs duty at 10 per cent, saying it will encourage the grey market.
All India Gem And Jewellery Domestic Council chairman Saiyam Mehra said that the industry’s critical concerns are not addressed in the Union Budget 2023-24.
“While the research and development grant will be provided to one of the IITs for the development of Lab Grown Diamond seeds and machines, the other sectors of the industry have been ignored, including the reduction in customs duty on gold. It will severely hamper the industry and encourage the grey market,” he stated.
GJC has been urging for reduction in customs duty of gold over the past many years, however, the duty on silver dore bars has been increased to be brought at par with the yellow metal and platinum in this budget, he said.
“This move will adversely affect the masses. We will continue to urge the government to reduce import duty. We are having a meeting with the finance minister on February 4, in Mumbai, where we shall once again stress upon the important concerns of the industry including reduction of customs duty, EMI on jewellery, relief in capital gain tax and Gold Monetisation Scheme among others,” Mehra added.
While maintaining the Customs duty for gold at 10 per cent, finance minister Nirmala Sitharaman proposed to increase the import duty on silver dore, bars and articles to 10 per cent to align them with that on gold and platinum.
Currently, the basic customs duty on silver dore is 6.1 per cent, while on semi-manufactured items it is 7.5 per cent.
The finance minister also proposed a cut in import duty on seeds used to make lab-grown diamonds with a view to boosting domestic manufacturing.
World Gold Council Regional CEO, India, Somasundaram PR said, while the reduction in custom duty on gold from 12.5 per cent to 10 per cent is a step in the right direction, the hike in the Agriculture Infrastructure and Development Cess has brought the overall duty to 15 per cent, same as before.
High taxes will impede efforts to make gold an asset class, particularly at a time when gold prices have risen globally, he said.
“Moreover, the thriving grey market has diluted efforts to reduce cash transactions and penalizes organised and compliant players,” he noted.
On a positive note, he said, the Budget also announced that the conversion of physical gold to Electronic Gold Receipt will not attract any capital gains.
“Thus, providing an overall digital boost to the industry and promoting investments in the electronic equivalent of gold. Directionally, this year’s Budget can be considered positive for the industry,” he added Gem and Jewellery Export Promotion Council (GJEPC) chairman Vipul Shah lauded the government for its recommendations to promote indigenous manufacturing in the emerging Lab-Grown Diamond (LGD) sector by providing Research Grants to IIT for 5 years.
“We welcome the reduction of Customs Duty on LGD seeds to zero from 5 per cent. It will ensure India’s end-to-end world leadership in rough to finished lab-grown diamond and jewellery manufacturing. In addition to that, the government has also agreed to have clear segregation Customs (IT HS) codes for Silver and Platinum studded Lab grown jewellery for better differentiation and identification at consumer level,” he stated.
Another positive pro-growth move is that the conversion of physical gold into digital gold will not attract capital gains tax, he said.
“However, the import duty reduction on gold, silver and platinum was not considered in the Budget. The Council will continue to pursue the same with the government for the overall welfare of the industry,” he added Former GJEPC chairman and managing director of Kama Jewelry Colin Shah said the FM did acknowledge the potential of the Lab Grown Diamonds for exports and to create employment.
“An R&D grant for five years will help in creating local manufacturing capacities, thereby reducing our dependence on imports of machinery in the years to come. The move to not impose any capital gains on the conversion of physical gold to electronic gold receipts and vice versa will help further gold monetization. This announcement may help in reducing the import of gold,” he added.
He further opined that the hike in basic customs duty on articles made from gold bars and import duty on silver will lead to a rise in the final price of locally made jewellery and may be challenging for the local refineries.
“There was no announcement for the natural diamond industry in terms of duties and our SNZs. Not having a repair policy will also be damaging for our DTA jewellery exporters,” he added.
PNG Jewellers Chairman and Managing Director Saurabh Gadgil said in this year’s Budget the biggest disappointment is that it did not address the concerns over reduction in import duty on gold and the creation of a level playing field in prices between the regular market and grey market.
“In fact, silver has been brought on parity with gold and platinum at 15% per cent. The focus of the government continues to focus on supporting new technologies and the nascent lab grown diamond industry is seen as a potential high employment space. The government has also announced that conversion of physical gold into digital gold will not attract capital gains tax which is likely to promote digital gold initiatives. Besides that, there is nothing major for the jewellery industry,” he added.