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In the Budget 2021-22, Finance Minister Nirmala Sitharaman proposed rationalising customs duties on gold and silver to 7.5 per cent from the current 12.5 per cent.
The duties on other precious metals were cut down to 6.9 per cent on gold dore bar from 11.85 per cent, 6.1 per cent on silver dore bar from 11 per cent, 10 per cent on platinum from 12.5 per cent, 10 per cent for gold and silver findings from 20 per cent and 10 per cent on precious metal coins from 12.5 per cent.
However, gold and silver, gold dore bar and silver dore bar will also attract ‘Agriculture Infrastructure and Development Cess’ at the rate of 2.5 per cent.
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The rationalisation of duty on gold and silver comes to 10.75 per cent — customs duty at 7.5 per cent, agriculture cess 2.5 per cent and social welfare surcharge 0.75 per cent.
He said it is a much-needed incentive for the organised and compliant players in the bullion and gold jewellery market and a rationalised duty structure and simplified processes are fundamental to an organised trading market.
Rural welfare schemes announced by the government to boost consumer sentiment will set the consumption cycles in motion and help the jewellery retailers as well, he added.
All India Gem & Jewellery Domestic Council (GJC) chairman Ashish Pethe said the jewellery industry is thankful to the Finance Ministry for reducing the import duty on gold and silver.
“This is a welcome decision made by the government and it will surely provide immense relief to the jewellers and the end consumers. Appointment of SEBI as the Regulatory for Gold Exchange is also a welcome step,” he said.
However, he urged the government to simplify the GMS (gold monetisation scheme) so that large quantities of idle gold lying in households can be better utilised for the nation, instead of relying on imports.
The GJC will continue to represent other key aspects such as reduction in GST rates, EMI on Jewellery among others and is confident that the government will continue to support the industry, Pethe added.
Echoing a similar view, PNG Jewellers Chairman and Managing Director Saurabh Gadgil welcomed the reduction of import duty saying this move will have a very positive impact on the industry at multiple levels.
“Gold will once again be within reach of the middle class and lower middle class due to reduced pricing. It will lead to increased consumption of gold. Gold prices had gone up, it had become increasingly out of reach of people, hence, this is a positive move,” he said.
There will also be a reduction in disparity in gold pricing in India vis-a-vis the international market helping trade in India, he noted.
“It will allow more and more players to become organized and bring about a sizeable reduction in black market activities in gold. Notably there is no change in the IT slabs, there has not been a levy of covid cess, which industry was worried about and capital gains tax has remained unchanged,” Gadgil said.
This will boost consumer demand and increase consumer confidence. Gold at sub Rs 50,000 per 10 grams levels for the upcoming wedding season between March to May is looking good for the industry, he added.
Gem and Jewellery Export Promotion Council (GJEPC) chairman Colin Shah said the reduction in duty from 12.5 per cent to 7.5 per cent will help the Gem and Jewellery exports become globally competitive.
“Reduction in import duty of silver and gold would give the much-needed boost to the sector and help it to move to the next level. In fact, high duty on precious metal had made our exports uncompetitive leading to large Indian diaspora or NRI, moving to Dubai, Hong Kong or other centres to buy jewellery which was largely impacting the employment as well as business in India,” he said.
The finance minister has also announced setting up of a new Sebi regulated gold exchange. “We welcome the move as this will surely ease marketability and sale of gold,” he added.
Senco Gold and Diamonds CEO Suvankar Sen said the duty reduction is a good initiative and a support by the government to reduce unofficial smuggling.
“It will help the sector to be more organised. The responsibility of SEBI to manage bullion exchange implementation will help in making the gem and jewellery sector more organised. It is a good initiative by the government to take care of consumers, company and manufacturing sector and karigars as well,” he pointed out.
Malabar Gold and Diamonds Chairman Ahammed MP said the import duty reduction will make trade compliance.
The government should also focus on strengthening the e-governance system to beef up the tracking mechanism of illegal transactions of gold. All in all, a transparent trade always boosts consumer confidence, he stated.
Meanwhile, Lala Jugal Kishore Jewellers director Tanya Rastogi opined that the move to reduce import duty will help the industry, making gold relatively more affordable to the end-user.
“This will promote fair businesses and discourage unorganised trade. The government is also trying to bring hallmarking to regulate the sector. As an organised player, we have been facing unfair competition from the unorganised sector and this step will eliminate the same. Agri-cess on the other hand is charged on customs duty amount and not the entire gold value. We are yet assessing the impact of the increase in the same,” she added.