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India Hikes Import Tax on Precious Metals

Jul 7, 2019 9:31 AM   By Rapaport News
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RAPAPORT... India’s Gem & Jewellery Export Promotion Council (GJEPC) has expressed disappointment with the nation’s latest Union Budget, adding that failure to reduce high duties on gold and diamonds will result in further job losses.

The council had been lobbying for a reduction in import duty on polished diamonds in a bid to boost the value of subsequent shipments out of the country. It had hoped this move would stem the decline in India’s polished exports, which fell 15% year on year in May.

However, the proposed cut from 7.5% to 2.5% did not materialize in the budget announced on July 5. Instead, the National Democratic Alliance-led government said it would be increasing import duty on gold and precious metals from 10% to 12.5% — a move the GJEPC believes will have a negative effect on India’s wider jewelry sector.

“The gem and jewelry industry is going through very tough times, with a decline in exports and job losses, and the industry expected some positive announcement as encouragement to our sector,” said GJEPC chairman Pramod Agrawal.

Reducing import duty on gold, diamonds and colored gemstones would release “blocked capital,” he said. Doing so would make imports cheaper and free up some much-needed liquidity for the trade. However, the government’s decision to do the opposite for gold — while making no change to duties on processed diamonds and gemstones — would stymie India’s jewelry sector, he added.

The move will “result in growth of business in neighboring countries, as the foreign tourists will stop buying jewelry from India,” Agrawal continued. He cautioned that the processing of larger diamonds was expected to “shift to competing countries such as China and Vietnam” as a result.

The council will continue to push for reductions in the import duty, as the status quo is “encouraging [the] grey market, hampering export competitiveness, and resulting in job losses.”

The gem and jewelry industry accounts for an estimated 7% of India’s GDP and 15% of its merchandise exports. It also employs 5 million people nationwide.

Image: Gold. (Alexander Boden/Flickr)
Tags: diamonds, exports, Gem & Jewellery Export Promotion Council, GJEPC, gold, India, Polished Diamonds, Pramod Agrawal, precious metals, Rapaport News, tax
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