|
|
India's Budget Offers No Surprises For Jewelry Trade
Feb 28, 2013 7:03 AM
By Dilipp S Nag
|
|
|
RAPAPORT... Members of India’s gem and jewelry trade were relieved that the government didn’t further hike the country’s gold import duty as part of the federal budget for fiscal 2013-14 but they were also disappointed that many of their concerns were not addressed.
“The industry was in a panic due to the mood of the government in the past few weeks but nothing wrong has come in the budget. There was no hike in the gold import duty and that was a big relief,” Bachhraj Bamalwa, the chairman of the All India Gems and Jewellery Trade Federation (GJF), told Rapaport News.
The industry was concerned that India may further increase the import duty on gold by another 2 percent during the budget announcement on February 28. In January of this year, the government increased the import duty on gold to 6 percent from 4 percent in an effort to discourage demand for the yellow metal, which has contributed to the country's large current account deficit.
Brokerage firm Religare stated that the government's decision not to levy any additional duty on gold in order to curb the current account deficit has come as a pleasant surprise for the investor and consumer. Bamalwa added that jewelry demand was weak in the past few days but is now expected to improve following the budget decision. The upcoming wedding season is also likely to support demand, according to trade officials.
However, Bamalwa noted that legacy issues remain, predominately the prevention of money-laundering, and he stressed that the trade will continue to lobby the government. GJF earlier this month stated that there was a lot of confusion throughout the country about the amended Prevention of Money-Laundering Act that went into effect February 15, 2013.
India’s Finance Minister, Palaniappan Chidambaram, in his budget speech on Thursday proposed amending the baggage rules permitting eligible passengers to bring in jewelry, given the sharp rise in gold prices. He proposed raising the duty-free limit to approximately $910 (INR 50,000) for male passengers and $1,821 (INR 100,000) for female passengers, subject to the usual conditions. He also proposed reducing the duty on preforms of precious and semi-precious stones from 10 percent to 2 percent to encourage exports.
However, there was no mention of the diamond industry’s recommendation to introduce a duty-free import quota for cut and polished diamonds. In its budget recommendation, the Gem & Jewellery Export Promotion Council (GJEPC) urged the government to allow a duty-free polished import quota of 15 percent based on a company's previous year’s exports. The proposal came as trading activity has suffered since the government imposed a 2 percent import duty on polished diamonds last January.
Chidambaram proposed levying a 4 percent excise duty on silver manufactured from smelting zinc or lead, bringing it on par with the excise duty applicable to silver obtained from copper ore and concentrates. Excise duty is a type of tax charged on locally produced goods. He also proposed introducing Commodities Transaction Tax (CTT) on non-agricultural commodities future contracts at 0.01 percent of the price of the trade.
"Overall it is a good budget with no major changes. Though CTT has been introduced I don't think it will pose a major impact for the bullion industry,” said Prithviraj Kothari, the managing director of RiddiSiddhi Bullions Ltd. “It’s good that the government has not imposed any restrictions or any further duty hike on bullion. On the whole it has been a satisfactory budget."
While presenting the budget, Chidambaram said that the country’s account deficit continues to be high mainly because of “our excessive dependence on oil imports, the high volume of coal imports, our passion for gold, and the slowdown in exports. This year, and perhaps next year too, we have to find over $75 billion to finance the current account deficit.”
India’s deficit -- which occurs when a country’s total imports of goods, services and transfers are greater than its exports -- hit a record high of 5.4 percent of its gross domestic product (GDP) in the second fiscal quarter that ended in September 2012.
Chidambaram stated that households must be given incentives to save in financial instruments rather than buy gold, and he proposed some financial instruments measures.
“The Finance Minister has correctly sought to divert some of the demand for gold from the investment sector to financial instruments, like inflation-indexed bonds and others which will not impact the more productive jewelry sector,” noted Mehul Choksi, the chairman and managing director of Gitanjali Group.
|
|
|
|
|
|
|
|
|
|
Tags:
budget, CAD, Chidambaram, diamond, Dilipp S Nag, Duty, gems, GJEPC, GJF, India, Jewelry, polished
|
|
|
|
|
|
|
|
|
|
|
|
|