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India Re-Considers Duty on Unbranded Jewelry

Mar 29, 2012 4:39 AM   By Dilipp S Nag
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RAPAPORT... India's Finance Minister, Pranab Mukherjee, is re-considering his budget proposal to tax unbranded jewelry following major protests by local jewelers across the country. He is also examining the issue of making PAN card declaration mandatory for buying jewelry of more than $3,938 (INR 200,000) in cash.

"I am re-considering about the proposed taxes on the jewelers," Mukherjee said in his reply to the debate on budget on Wednesday in the Rajya Sabha, the upper house of Parliament. "As it will have to be done through the legislative route, I am not exactly going to indicate what would be the modality."

He also said that there is no plan to bring the jewelers with a turnover of up to $984,640 (INR 50 million) within the tax limit. "Self-declaration that my turnover is INR 50 million, will be the final say. There will be no further scrutiny,” Mukherjee noted.

Mukherjee, however, was firm on the proposed customs duty on gold as the government seeks to reduce imports due to current account deficit.

“Though the craze for gold is there, reduction in import duty is not possible,” he said.

The country’s gold imports have increased from $4.1 billion in 2001 and 2002 to $33.8 billion in 2010 and 2011 due to the metal's record price run coupled with rising demand in the country, and at these levels imports are a huge burden on the balance of payments and accentuate the current account deficit, according to the Associated Chambers of Commerce and Industry of India (ASSOCHAM).

Mukherjee in his budget speech on March 16 proposed to double the customs duty on gold to 4 percent soon after fixing the import tax on gold at 2 percent of its value in January from the earlier flat rate of INR 300 per 10 grams. He also proposed increasing the excise duty --a type of tax charged on goods produced locally-- on refined gold from 1.5 percent to 3 percent and imposing 1 percent excise duty on unbranded jewelry, among other taxes.

Indian bullion traders and jewelry retailers, unhappy with the finance minister’s announcement for the gems and jewelry industry in the Union Budget 2012-13, have been on strike since March 17 to oppose the proposed measures. There were also reports of agitating jewelers attacking jewelry showroom for not supporting the indefinite strike call in some areas.

The finance minister's consideration was a relief, according to Bachhraj Bamalwa, the chairman of the All India Gems and Jewellery Federation (GJF). “But we need to see the alternate formula before the industry accepts it.”

GJF has extended its strike until March 31 but the federation is supporting its associate bodies in their call for indefinite strike.

As a result of this, the industry’s daily turnover loss is estimated to be around $197 million (INR 10 billion), Bamalwa said.

Anjani Sinha, the president of Indian Bullion Market Association (IBMA), this past week told Rapaport News that gold imports for India, the world's largest consumer of yellow metal, could fall to around 500 to 600 metric tons in 2012 from 969 tons estimated for 2011 due to increases in the customs duty.
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Tags: ASSOCHAM, Bachhraj Bamalwa, Customs duty, Dilipp S Nag, GJF, gold, IBMA, Import Tax, India, Pranab Mukherjee, Rapaport, Unbranded Jewelry
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