Import duty on gold jewellery increased to 15%

Move aimed at protecting the domestic industry

In a move aimed at protecting the domestic jewellery industry, the Centre on Tuesday increased the Customs duty on gold and silver jewellery by five percentage points to 15 per cent.

Traders had been exploring the possibility of importing jewellery, especially gold, as it is hassle-free and does not attract the Reserve Bank of India’s 80:20 norms, under which 20 per cent of imported gold has to be re-exported. There also was a plan to import only crude jewellery, manufacturing cost of which is hardly one per cent, to avoid the 80:20 rule. The traders were exploring imports from Singapore and Dubai.

However, the government has plugged this loophole by increasing import duty to 15 per cent.

TWIN BENEFITS

The govt’s decision to raise Customs duty on gold jewellery to 15% would:

• PLUG LOOPHOLE

By importing gold jewellery, instead of gold, traders could have avoided RBI’s 80:20 norms, under which 20 per cent of imported gold has to be re-exported

• HELP DOMESTIC INDUSTRY

Imported jewellery — mostly machine-made and cheaper because of lower labour cost — could have been hurting Indian jewellery makers’ business

Sudheesh Nambiath, India Analyst at GFMS Thomson Reuters, said: “After the duty on gold was increased to 10 per cent and with new import norms in place, it made sense to import jewellery to meet at least partial requirement, as this was free of hassles. However, duty on jewellery at 15 per cent has killed the benefit that existed.”

In a press note, the finance ministry said that jewellery making was a labour-intensive industry, with millions of artisans dependent on this sector for their livelihood.

With no difference in duty on primary metal and jewellery earlier, the note says, “there is an apprehension that Indian jewellery makers would not be able to compete with cheaper imports, particularly when a majority of the imported jewellery is machine-made, compared with hand-made jewellery in India... To protect the interests of small artisans, the Customs duty on articles of jewellery and of goldsmiths’ or silversmiths’ wares and parts thereof is being increased from 10 per cent to 15 per cent”.

Given that labour costs for hand-made jewellery are far higher (at 5-10 per cent of gold value) compared with just 1 per cent for machine-made jewellery, the latest move by the government should provide a level playing field to domestic jewellery makers.

A notification to this effect was issued on Tuesday.