The gem and jewellery sector is looking for a positive outcome from the budget.
The gem and jewellery sector makes a significant contribution to the country’s overall economy. Just like there were high expectations from last year’s budget this year too, the fraternity is looking for a positive outcome from the budget. Considering that the current government believes in encouraging and promoting a business conducive environment, we are hopeful that they will address some of the concerns of the sector, which will benefit the industry. Following are the wishes and expectations from Union Budget 2021-22.
1) Providing rebate to the foreigners on buying jewellery in India
Foreign tourists and non-resident Indians (NRIs) visiting India are not investing in gold jewellery like before as there is no mechanism to refund the GST on their purchase which they are otherwise entitled to claim. The Integrated Goods and Services Tax Act of 2017 allows a foreign national or an NRI, who enters India for a stay of fewer than six months, to claim a GST refund when he leaves India. Gold jewellery attracts 3 per cent GST. The tax component is significant on account of the high value of the commodity and that becomes one of the decisive factors for a tourist to buy Gold Jewellery in India
2) Indian refiners to be allowed to import Dore bars from foreign gold miners
Currently, only one company is LBMA accredited gold refinery in India. And, its parent company in Switzerland has entered into a long term Dore bar supplies contract with large and established mines. Hence, the rest of the small or medium Indian refineries are only able to source from small and artisanal mines which increases the risks of supplies. In the past, a supply of Dore bars was allowed by international banks like JP Morgan and Standard Bank or ANZ Bank or International refineries like Valcambi or Metalor. But the current laws are a hindrance for small and medium refineries, and only one refinery is able to procure directly. In this budget, the Government should restrict this monopoly and allow Dore bars to be shipped into India from other approved LBMA accredited refineries or international gold supplier banks who are approved to supply pure bars into India.
3) Reduction in import duty on Precious metals of 12.5 per cent
Multiple increases in import duty on precious metals had resulted in gold coming in from countries such as South Korea and Malaysia, with whom India has signed Free Trade Agreements (FTAs), thus increasing the price arbitrage in the domestic markets. The resultant gap in the price of official gold imported through the banking channel and unofficial imports is hurting manufacturers/retailers/bullion importing agencies/refiners and many others involved in the tax compliant business systems. The high import duty is indirectly creating a disincentive to the organized players in the industry. A lower Basic Customs Duty (BCD) on gold should help make the unofficial route for gold imports unattractive.
The author is Director, Augmont
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