A recently released report from India Ratings and Research (Ind-Ra) says that organised jewellery retailers are expected to record 10%-12% top line growth in FY17 due to higher number of wedding days during the period, coupled with reduced obstacles on the regulatory front.

The sector posted flat revenue growth in FY16 and low single digit growth in Q1FY17.

Citing a World Gold Council report, the Ind-Ra study says that gold imports contracted and jewellery demand fell by 32% in H1CY16 as a result of key hurdles such as “1) strike by jewellers on account of imposition of excise duty and government regulations, 2) delays in purchases on the expectation of fall in gold prices, 3) increase in recycled gold, and 4) possibility of higher share of unaccounted gold in the system due to the spike in prices, regulatory hurdles and levy of excise duty.”

Besides the larger number of wedding days in 2017 (the report notes - “wedding jewellery is a key driver for demand and accounts for 60%-65% of the market demand), other positive factors that will boost the organised jewellery sector include increase in the limit of collectible amount under the Gold Savings Scheme to 35% from 25% of net worth and the compulsory hallmarking. Some of the growth will be on account of shifting from the unorganised sector, it adds.

The report also discusses the potential overhang of the impending GST Bill, noting that the GST committee report recommends an all-inclusive tax rate of 2%-6% on precious metals. It points out that compared to the VAT and excise at 1% each that the sector currently pays, GST rate over and above 2% is likely to increase the tax incidence on end consumers, which may impact non-wedding segment demand and prompt customers to opt for the unorganised sector.