Budget 2024 Expectations For Gold, Silver & Jewellery: From Import Duty To Diamond Mining, 6 Wish lists
Wed July 03 2024
The hot topic this month is none other than the Union Budget 2024 which will be announced by FM Nirmala Sitharaman after the saffron party's third big win in India's election. With the gems and jewellery segment, contributing about 10% to India's merchandise exports, GJEPC Chairman Vipul Shah has made key recommendations to drive the sector in the pre-budget meeting.
Shah sheds light on the need for a reduction in import duty of precious metals while suggesting introducing duty drawback on exports of Platinum Jewellery. Further, Shah recommends measures that could facilitate the sale of rough diamonds in Special Notified Zones (SNZs).
GJEPC's chairman urges the central government to announce key measures that could improve exports of the gems and jewellery sector. Not only exports, but Shah believes that such would generate employment in the sector as well.
He said, "The Indian gems and jewellery industry contributes around 10% to India's total merchandise exports. However, the industry is currently facing some challenges due to the geopolitical scenario, the emergence of the beneficiation scheme, and issues related to rough diamond sourcing. Against the backdrop of the macroeconomic scenario, I urge the government to take measures to revive exports in this sector. I request the Hon'ble Finance Minister to introduce a Safe Harbour rule in SNZs, introduce the Diamond Imprest License, and reduce the import duty on gold, silver, and platinum bars to 4%; and introduce duty drawback on exports of platinum Jewellery to take advantage of India UAE CEPA."
He added, "These measures are crucial to give a competitive edge to our players and boost exports and at the same time generate employment in the sector."
Accordingly, Shah has made 6 recommendations to take the gems and jewellery sector to the next level. These are:
GJEPC has urged the Government to consider its long pending demand for the sale of rough diamonds in Special Notified Zones (SNZs) through the Safe Harbour Rule and to expand the ambit of entities entitled to operate through SNZs. Currently, only viewing sessions are held by mining countries at SNZs. SNZs were established with the prime objective that there would be easy availability of rough diamonds by creating efficiencies in the procurement of rough diamonds by allowing overseas diamond mining companies to sell their produce directly to Indian manufacturers through such SNZs.
Sale is allowed in countries like Belgium and Dubai, while there is no direct tax on the sale of displayed rough diamonds in Dubai and there is a 0.187% turnover tax on sales in Belgium. Indian bidders CANNOT purchase Rough Diamonds from SNZ, as of date, as the waiver under section 9(1)(i) of the Income-Tax Law to such sale at SNZ by FMCs not provided.
GJPEC has proposed the establishment of an SNZ for rough gemstones in Jaipur. With these SNZs in Mumbai, Surat, and Jaipur, the critical issue of raw material availability would be greatly relieved.
With a view to further extend and expand the scope of SNZs, GJEPC requested the Government to also allow globally recognised diamond broking/ trading houses such as Bonas and I Hennig to also similarly operate from such SNZs. Such trading houses are the focal point for the sale of diamonds by smaller miners which cumulatively comprise close to 35% of the global mining produce. Pertinently, such trading houses are already having a significant presence in other jurisdictions such as Dubai, Antwerp, etc. Allowing such trading houses to operate from SNZs with similar facilitation as provided to the diamond mining companies would ensure that India has more flexible, timely and cost-efficient access to such diamonds mined by smaller miners and is thus able to retain its position on the global roadmap as a leader in cutting and polishing of diamonds.
Under the beneficiation scheme, some mining countries do not allow the export of raw/rough diamonds without some value addition (cutting). These diamonds when imported in India are not considered rough diamonds but treated as cut & polished diamonds and attract BCD of 5%. This makes the export of polished diamonds from India less competitive as compared to competing countries like China, Vietnam and Sri Lanka. Due to beneficiation, the business is shifting to mining countries like South Africa, Namibia, Tanzania etc.
Diamond Imprest Licence which was there in Foreign Trade policy was withdrawn after the import duty on CPD was abolished in the year of 2009. With the re-introduction of import duty on CPD in the year 2012, the scheme was not re-introduced. GJEPC thinks that Indian diamond exporters above a certain export turnover threshold should be allowed to import at least 5%, of the average export turnover of the preceding three years.
This will provide a level playing field for Indian MSME diamond exporters with that of their larger peers. It will stop the flight of investment of Indian diamantaires to diamond mining destinations. It will give more employment in terms of diamond assorters and processing of semi-finished diamonds in the factories.
The Council has also sought a reduction in import duty on precious metals Gold Bar (7108) from 15% to 4%. This will ensure that duty blockage of around Rs. 982.16 crore can be released resulting in more working capital in hand for industry. Untapped export potential for gold jewellery can be realised with more working capital (at least US$2 billion of US$ 11 billion in a medium period of 2 years). GJEPC has sought a reduction in import duty on Silver Bars (7106) from 10% to 4%; and a reduction in import duty on Platinum Bars (7110) from 12.5% to 4%.
In the absence of the tariff rate of platinum combined with high import duties and non-availability of duty-free platinum from nominated agencies/banks, this imposes constraints on DTA exporters and therefore the majority of exports of platinum jewellery are happening through SEZs. Since duty drawback is not available on platinum, therefore DTA units are not able to be exported as they are not competitive in the international market. Also, in the absence of the tariff rate for platinum, the Drawback department is unable to fix drawback rates for platinum jewellery, since there is no basis for determining drawback rates.
India's gem and jewellery industry heavily relies on imports for its raw materials, including gold, diamonds, silver, and coloured gemstones. These materials are brought into the country and undergo either cutting and polishing or are transformed into finished jewellery before being exported worldwide. This thriving industry sustains approximately 4.3 million jobs, contributes about 10% to the country's merchandise exports, and significantly impacts the overall economic growth.
India has established itself as the leading choice for sourcing gems and jewellery on a global scale. However, to uphold this position of prominence, the industry must remain competitive in the international market. It requires strategic policy interventions that adapt to the evolving business landscape within the sector.
Source: https://www.goodreturns.in/