As scheduled Nirmala Sitharaman, Minister of Finance presented the Budget 2021-2022 proposals on February 1, 2021. De facto the Budget proposals for 2021-2022 rest on 6 pillars, i. Health and Wellbeing, ii. Physical & Financial Capital, and Infrastructure, iii. Inclusive Development for Aspirational India, iv. Reinvigorating Human Capital, v. Innovation and R&D & vi. Minimum Government and Maximum Governance.
Looking at Gem and Jewellery (GJ) industry & trade, the budget said: “Gold and silver presently attract a basic customs duty of 12.5%. Since the duty was raised from 10% in July 2019, prices of precious metals have risen sharply. To bring it closer to previous levels, we are rationalizing custom duty on gold and silver.”
For the disposal of seized gold said, “1. Section 110 of the Customs Act is proposed to be amended to revise the procedure for pre-trial disposal of seized gold for expediting such disposals.”
Under the Part B: Customs duty rate changes, 1. Changes in basic customs duty for creating level playing field for the benefit of farmer, MSME and other domestic manufacturers [with effect from 02.02.2021]:
Gem and Jewellery:
Cut and Polished Cubic Zirconia the duty hiked from 7.5% to 15%
Synthetic Cut and Polished Stones levy hiked from 7.5% to 15%
For Precious Metals, the budget said: Import duty on Gold and silver reduced from 12.5% to 7.5%, duty on gold doré bar reduced from 11.85% to 6.9%. For Silver doré bar that reduced from 11% to 6.1%, Platinum, Palladium, etc (PGM Group metal) reduced duty from 12.5% to 10%.
Duty of Gold/silver findings deducted from 20% to 10%, equally, Waste & Scrap of Precious Metals also reduced from 12.5% to 10%, Spent Catalyst or ash containing precious metals duty reduced from 11.85% to 9.2% & Precious Metal Coins slashed duty from 12.5% to 10%.
Yet it is to be noted that, FM proposal also announced the imposition of Agriculture Infrastructure and Development Cess on specified goods [w.e.f. 2.2.2021] that includes Gold, Silver and doré bars & attracts the Cess of 2.5%.
Lets’ learn the expressions of GJ (Gem-n-Jewellery) Fraternity:
Somasundaram PR, Managing Director, India-World Gold Council: “The rationalisation of import duty on gold to around 10.75% from 12.5% is a welcome move and timely. Hopefully, this is the first of a series of such cuts to make bullion an asset class that operates mainstream. It is a much needed incentive for the organised and compliant players in the bullion and gold jewellery market.
A rationalised duty structure and simplified processes are fundamental to an organised trading market. Following appointment of IFSCA to regulate the International Bullion Exchange at GIFT City last year, the regulatory clarity in this budget around a domestic bullion exchange will spur infrastructure development and good delivery standards, enabling India to emerge as a major bullion trading hub.
Revision of the procedure for disposal of seized gold to expedite the process will further prevent illicit trade.
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. Overall, the budget should lead to positive outcomes for the industry.”
Sachin Jain, Managing Director, De Beers India on the Gems and Jewellery sector: “Import duty reduction on gold and silver from 12.5% to 7.5% is a step in the right direction and will boost the diamonds, gems and jewellery sector.
As a result of this cut, prices of precious metals will fall, which in turn will spur demand and footfalls into the retail/online stores. As we did not see any drastic increase in taxes, the demand for precious diamonds, gems and jewellery will continue to be strong among consumers. Overall, the budget announcement for the sector has struck an optimistic chord in the new year."
Dr Saurabh Gadgil, Chairman and Managing Director PNG Jewellers: "We welcome the Government’s move to reduce the customs duty on gold from 12.5 % to 10 % after repeated recommendations from the industry year after year. 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 and hence this is a positive move. There will also be a reduction in disparity in gold pricing in India Vis-à-vis the international market helping trade in India. It will allow more and more players to become organized and bring about a sizable reduction in black market activities in gold".
Aditya Pethe, Director, WHP Jewellers: “The reduction of import duty which is 5% on Gold and Silver is a very positive step. It will have two effects, firstly the price of gold, of course, will come down to a great extent, and secondly, because of the 12% duty which was prevailing before, it encouraged smuggling.
Now at 7.5%, the smuggling will be discouraged, gold purchase through an organized retailer is encouraged and in the end, the consumers will get Gold at 5% cheaper so it's a very positive step which was not expected in this budget and is a welcome surprise. There has been an increase in Agri Cess but that is on the custom duty amount keeping the reduction in Gold Import Duty still a good move.”
Ishu Datwani, Founder, Anmol: “On the face of it the Budget seems to be Growth Oriented. As far as the Gem & Jewellery sector is concerned - the reduction in customs duty from 12.5% to 7.5% is a welcome move. It will be a major disincentive to smuggling.”
Tanya Rastogi, Director, Lala Jugal Kishore Jewellers: “The entire industry has been waiting and hoping for a move like this and we are glad that the government considered our industry as we have been one of the worst-hit sectors during Covid-19 period and the move to reduce import duty will really have a positive impact on gold prices and discourage illegal trade. This will also help the rising gold prices making the yellow metal relatively more affordable to the end-user.
This will promote fair businesses and discourage unorganized trade. The government is also trying to bring hallmarking to regulate the sector. As an organized player we have been facing unfair competition from the unorganized sector and this step will eliminate the same. Agri-Cess on the other hand is charged on custom duty amount and not the entire gold value. We are yet assessing the impact of the increase in the same.”
Vaibhav Saraf, Director, Aisshpra Gems and Jewels: “The budget has brought about many reforms increased spending on healthcare, infrastructure, roads and water coupled with another boost to Aatma Nirbhar Bharat will boost employment retail economy. Faceless Income tax Appellate Tribunal, keeping super senior citizens out of tax ambit, reducing timeline for reopening of income tax cases are all indicators of Governments intentions towards simpler and smoother business.
The reduction of import duties on gold is a very welcome and much-awaited step and will reduce gold smuggling, bring domestic gold prices closer to the international pricing, and therefore lower gold prices. Jewellers will require slightly lesser working capital in INR. This move is going to positively impact jewellers and consumers both.
Snehal Choksey, Director, Shobha Shringar Jewellers: “Reduction in customs duty by 2.5% is a very positive and welcome move by the government. This will surely enhance the sale of jewellery but most importantly it will help to reduce the illegal trade.”
Suvankar Sen, CEO, Senco Gold and Diamonds: “The duty reduction is a good initiative and a support by Govt to reduce unofficial smuggling. It will help the sector to be more organized.
The responsibility of SEBI to manage bullion exchange implementation will help in making the gem and jewelry sector more organized. It is a good initiative by Government to take care of consumers, company, and manufacturing sector, karigars as well”
Rajesh Neelakanta, ED & CEO of BVC Logistics regarding the Union Budget: “The logistics industry was looking forward to this year’s budget speech. We were expecting an update on the long-awaited National Logistics Policy. However there have been some hits and misses for us. Certain good points to look forward are reduction in timelines for reopening of assessments from 6 years to 3 years.
Businesses can now breathe relatively easy because of this announcement. Boost to infrastructure development by allowing TDS exemption for investments in to INVITs. Rationalizing custom duties on gold and silver is a welcome move. The focus on logistics through the development of road and highway projects will encourage economic transformation and seek to improve connectivity that is much needed for the growing economy.”
