The Indian jewelery segment expects Finance Minister Nirmala Sitaraman to cut customs duties on gold in the upcoming 2023-24 Union Budget, at a time when gold prices are rising to record highs, hitting retail sales during the peak holiday season.
At present, the basic customs duty on gold is around 12.5% and an additional 2.5% must be given as an agricultural infrastructure fee. In the last budget, the duty to reduce the current account deficit was raised. The result was a sharp reduction in gold imports from 1068 tons in 2021 to 706 tons in 2022. The tax increase also resulted in an increase in gold smuggling to India, some 200 tons a year, and that’s actually boosting retail gold sales. say industry sources.
The demand of the Gems and Jewelry Export Promotion Council (GJEPC) is to reduce the import duty to 4% on gold, silver and platinum.
Organized retailers had growth of around 36% in the last fiscal year, following the loss of business during Covid-19, when stores closed in most parts of the country. The organized sector accounts for almost a third of the market, with the highly fragmented unorganized sector occupying the remainder. Most of the smuggled gold is manufactured as jewelry and sold through the unorganized sector, organized retailers say.
India led the global recovery in gold sales with a year-on-year growth of 17% with a demand of 146 tonnes in the third quarter of 2022, the highest growth since 2018, the World Gold Council said recently when analyzing global sales in the third quarter. quarter of 2022. A recent study by Crisil Ratings of 76 gold jewelery retailers, accounting for 33% of annual revenue of ₹3.5 lakh crore from the organized sector, says that retail sales volume will increase by 16-18 % yoy to 670-700 tons this fiscal year. , crossing the pre-pandemic level of 600 tons, largely supported by demand for weddings and festivals, which accounts for 80-85% of gold jewelry sales.
But retailers say customers are putting off sales because of high prices. From a retail sales point of view, currently, in addition to 12.5% customs duty and 2.5% cessation, 3% is GST and another 5% goes to manufacturing expenses. From the customer’s point of view, based on the current price of Rs 42,160 for an 8 gram gold sovereign, the customer will have to pay a final price of almost Rs 46,000. These high prices are causing many customers to put off buying and many are now trying to sell gold. The weakening dollar in global markets, inflation, fears of a recession and central banks increasing gold holdings and large investors turning to gold as a safe haven investment in uncertain times are driving up gold prices. .
“Reducing import duties on gold, silver and platinum to 4% is a top recommendation on our wish list for the Government of India. GJEPC believes that this import duty is draining capital from exporters and is the generator of bad economic practices for everyone”. rates,” according to Vipul Shah, Chairman of the Gems and Jewelry Export Promotion Council (GJEPC). Reducing the import tariff will help to have a healthy and transparent industry, as well as help reduce the blockade of working capital of the exporters, says GJEPC.
“As we await the fiscal budget of 2023, we have a great opportunity to unlock the true potential of India’s jewelery sector and develop it into a world leader and hub of commerce. We believe that with the right policies and support of the Government of India, we can further encourage the industry to become more organized,” says Ramesh Kalyanaraman, CEO of Kalyan Jewellers.
Exporters are also demanding that rough diamonds be allowed to be sold in special notified zones, a jewelry repair policy to seize a $5.75 billion global opportunity, the abolition of import duties on lab-grown diamond seeds ( LGD), etc.