Jewellery industry expects duty cuts, tax reforms, and streamlined regulations

Mon July 08 2024

The jewellery industry is eagerly looking forward to potential duty cuts on gold, silver, diamonds, and platinum as part of the upcoming 2024-25 Budget, set to be presented by Finance Minister Nirmala Sitharaman on July 23. This expectation is especially significant as it coincides with the wedding and festival season, a period traditionally marked by high demand for jewellery.

The current duty structure has several complexities and inefficiencies, according to Surendra Mehta, Secretary of the India Bullion and Jewellers Association (IBJA). He noted that varying duty rates on gold and silver imports from different countries lead to market distortions.

For instance, under the Comprehensive Economic Partnership Agreement (CEPA) with the UAE, the duties on gold and silver differ from those imposed on imports from least developed countries or on LBMA (London Bullion Market Association) certified products. “In case of silver, the duty under the CEPA agreement is only 8%, but duty when imported from the LBMA is 15%. We believe this discrepancy needs to be addressed. A reduction in duty by 2-3%, or even 5%, for both gold and silver could significantly benefit jewellery companies," said.

He believes such a change will not only provide a level the playing field among jewellers and bullion dealers but also enhance price discovery in the India International Bullion Exchange. Mehta also pointed out the need for changes in the taxation policy.

The income tax on interest from sovereign gold bonds should be reduced, he said, arguing that the current 2.5% interest rate is relatively low. Removing the tax could incentivise senior citizens to invest in these bonds.

Mehta also advocated for the removal of capital gains tax on the sale of gold and jewellery. India has a significant amount of household gold, estimated between 25,000 to 30,000 tonnes, which remains untapped due to tax implications.

Eliminating this tax could reduce the need for gold imports, thereby saving substantial foreign exchange. The jewellery industry also faces challenges due to the involvement of multiple regulators, including the Reserve Bank of India (RBI), the Commerce Ministry, the Finance Ministry, and others.

Mehta believes having a single regulator such as the India International Financial Services Centre Authority (IFSCA) could streamline processes and provide more consistent and effective regulation. He praised the IFSCA's performance, suggesting that consolidating regulatory authority under this body could significantly benefit the industry.

Source: https://www.cnbctv18.com/