Union Budget 2021: Gems, jewellery industry seeks reduction of import duty to 4%

Mumbai: The gem and jewellery industry has sought reduction in customs duty on gold to four percent, withdrawal of tax collected at source (TCS), cut in import duty on polished precious and semi-precious gemstones, in the upcoming Union Budget 2021-22. All India Gem and Jewellery Domestic Council (GJC) Chairman Ashish Pethe told PTI, “We urge the government to reduce the customs duty to 4 percent from the current 12.5 percent. If the tax rate is not kept at this level, it will encourage smuggling and encourage people to do unorganised business.” He further urged the government to keep goods falling under HSN-71 (Harmonised System Nomenclature) out of the purview of TCS provisions as the amount of funds blocked in TCS is 6.67 times more than the ability to pay income tax, resulting in blockage of funds. Pethe also said the facility of equated-montly instalment (EMI) should be extended to the gems and jewellery industry and to increase the cash purchase limit to Rs 1 lakh from the current Rs 10,000. Gems and Jewellery Export Promotion Council (GJEPC) Chairman Colin Shah urged the government to reduce import duty on cut and polished precious and semi-precious gemstones to 2.5 percent, from the current 7.5 percent. In its Budget recommendations, GJEPC has also proposed a hike in import duty on synthetic cut and polished stones to 25 percent from 5 percent. Shah said GJEPC has also proposed amendment in taxation provisions to allow sale of rough diamonds in special notified zone in Mumbai. Malabar Group Chairman MP Ahammed has urged the government that tax rate, including import duty on gold and GST, should be reduced to 7 percent. Ahammed has also said the government should create an enabling environment for the jewellery retail trade to introduce MRP pricing in jewellery without any pricing break-up in terms of GST or other taxes. Currently, gold attracts 12.5 percent import duty and 3 percent GST and total duty and GST implication works out at 15.5 percent. “Such high taxes have led to large-scale smuggling and tax evasion. Therefore, reducing import duty-GST implication to 7 percent is an effective measure to prevent those industry malpractices,” he added. Although the tax and duty implication is 15.5 percent on gold, the actual implication comes to around 20 percent after adding the mining royalties. The gold and diamond trade together accounts for 7.5 percent of the country’s GDP and 14 percent of the country’s total exports. About 60 lakh people are employed in this sector. Therefore, Ahammed noted that the government should take steps to facilitate comprehensive development of the grade trade sector so that it can continue to play a pivotal role in the growth of the economy. PNG Jewellers Chairman and Managing Director Saurabh Gadgil opined that 2020-21 has had a negative impact on the industry over all. “While jewellers are on track to recover from the impact of the pandemic and a muted wedding season, we are hopeful that the Budget 2021-22 will look at the jewellery industry favourably and roll out many SOPs and important policy changes that can help revive the industry in the next one year,” he said. It is critical that the government also look at policies that encourage banks to kick-start lending once again to the jewellery sector, which will help businesses across the board to maintain liquidity and ensure survival and success, he pointed out. From the consumer perspective, he said gold should be deemed as an asset class like the mutual funds, allowing an increase in consumer investment confidence as well as the availability of facilities like EMI schemes to invest in gold products. “Setting up of a spot exchange, announced in the 2018 Budget on an immediate basis, will ensure consistency in pricing of gold across the country. This will boost consumer confidence and help people sell their gold at daily transparent prices,” he added.