The Rs 325,000-cr domestic jewellery industry will suffer due to the substantial increase in import duty on precious metals and stones. The government should take the industry into confidence before decreeing such moves, Bachhraj Bamalwa, chairman, All India Gems & Jewellery Trade Federation, tells Dilip Kumar Jha. Excerpts:
How will the import duty impact the gold and diamond jewellery industry?
It will dampen demand for jewellery. Although the immediate impact has been cushioned by the (recent) appreciation of the rupee, the long-term impact will not be good for the industry. However, I welcome the government’s decision to raise the duty on polished diamonds. This will create job opportunities for diamond cutters and polishers, provided the government takes initiatives to provide rough diamonds. It will also reduce overall demand of gold investment products, including coins and bars.
Will the one per cent differential in import duty between concentrate and refined gold lead to raw gold import?
No. The excise duty is now 1.5 per cent on production of gold bars from gold ore and dore bars (semi-processed alloys) which nullifies the benefit offered through differential duty. Nor will it reduce the gold price in India.
What could be the government's motive for the sudden and steep rise in import duty?
The objective is to reduce the fiscal deficit through every possible means. Through the increase in import duty on gold, silver, diamonds and platinum, the exchequer will garner an extra Rs 3,000 crore from the industry. We were asking for removal of import duty. Instead, it was doubled.
What is expected from the government in return?
I do not know what is the government’s long-term policy. On the one side, it is trying to bring in a simplified tax regime like the proposed Goods and Services Tax in the footsteps of advanced countries. On the other, it is increasing the import duty on raw materials. In advanced countries, gold is allowed to be imported free of duty. Yes, we expect the government to set aside a part of this kitty for development of the industry and for the betterment of artisans of the industry. The government should withdraw excise duty on any form of jewellery.
Experts are saying the hike in import duty will promote smuggling. What is your opinion?
Smuggling was completely stopped since the government allowed the import of gold through legal channels. This increase in import duty will definitely encourage it, particularly through the borders of neighbouring countries. The profits through these channels may also increase terrorist activities.
What is the way forward?
We urge the government to take the jewellery industry into confidence before taking such major steps. GJF keenly wants to work hand-in-hand with the government for the benefit of both the exchequer and the trade.
