The gems and jewellery industry cheered the 2020-21 Union Budget, which proposes invoice financing, working capital and debt financing by banks and NBFCs, increase in audit threshold from 1 crore to5 crore to encourage MSMEs, and the establishment of a bullion exchange at Gift City
Finance Minister Nirmala Sitharaman, in the Union Budget for the fiscal year 2020-21, presented a gamut of initiatives that gave the gems and jewellery industry reason to cheer. The government proposed to reduce the import duty on platinum from the existing 12.5 per cent to 7.5 per cent. Also, the proposal to establish a bullion exchange at Gift City in Gandhinagar is a move that will attract international bullion trading.
BULLION EXCHANGE IN GIFT CITY
GJEPC Chairman Pramod Kumar Agrawal, said, ‘We welcome the Union Budget announced by the Finance Minister. It certainly has measures to boost domestic consumption and to put the overall economy on growth trajectory. We strongly believe that the government is determined to make India a $5 trillion economy. The proposal to establish a bullion exchange in Gift City will attract international bullion trading to India. It will also help in establishment of a full-fledged bullion exchange in India in the future.’
‘However, we understand that the government has now equated the gold bullion sector under a single import duty regime by increasing the import duty on gold coins from 10 per cent to 12.5 per cent. Our demand was to decrease the import duty on bullion to 4 per cent from 12.5 per cent,’ added Agrawal.
EASIER FINANCE AND AUDITING CONDITIONS
Speaking about other important points in the budget, Agarwal said, ‘Initiatives like invoice financing, working capital and debt financing by banks and NBFCs, raising the threshold for audit from 1 crore to5 crore will address the existing demands of the G&J sector and accelerate growth in the sector. The industry also believes that the NIRVIK Scheme will result in increase of export credit disbursement to the gems and jewellery sector. With these initiatives, the government marches ahead to make India a global gems and jewellery hub by 2025.’
WITHDRAWAL OF DIVIDEND DISTRIBUTION TAX
This is an encouraging move. The decrease in tax on various income slabs will empower purchasing power of common people, said Agarwal.
IMPORT DUTY HIKE ON ROUGH COLORED GEMSTONES AND OTHERS
Commenting on the proposed import duty rise on rough coloured gemstones, rough semiprecious gemstones and pre-forms of precious and semi-precious gemstones, Agrawal said, ‘These rough gemstones are primarily imported for cutting and polishing work and are later exported internationally. There is miniscule domestic consumption of coloured gemstones and India competes in exports in this segment with China and Thailand. This rise in import duty of rough coloured gemstones could upset the exports of gemstones from Rajasthan, the hub of coloured gemstones processing, which employees around 1.5 lakh workers. We earnestly request the government to roll back the proposed import duty on these rough coloured gemstones in the interest of gemstone exports from India.’
THE UNION BUDGET2020-21 CONTAINS THE FOLLOWING PROVISIONS FOR THE INDIAN GEMS AND JEWELLERYSECTOR:
- Basic customs duty on rubies, emeralds and sapphires, unset and imported uncut, falling under heading 7103, increased from nil to 0.5%
- Basic customs duty on rough coloured gemstones, falling under heading 7103, increased from nil to 0.5%
- Basic customs duty on rough semi-precious stones, falling under heading 7103, increased from nil to 0.5%
- Basic customs duty on pre-forms of precious and semiprecious stones, falling under heading 7103, increased from nil to 0.5%
- Basic customs duty on rough synthetic gemstones, falling under heading 7104, increased from nil to 0.5%
- Basic customs duty on rough cubic zirconia, falling under heading 7104, increased from nil to 0.5%
- Basic customs duty on polished cubic zirconia, falling under heading 7104, increased 5% to 7.5%
- The end use-based exemption available on gold in the form of wire, ribbon, pre-form of purity 99.9% and above used in manufacture of specified goods withdrawn
- The end use-based exemption available on gold wire with phosphorous or antimony doping used in manufacture of specified goods withdrawn
- Basic customs duty on platinum and palladium reduced from 12.5% to 7.5% for use in manufacture of all goods (including noble metal compounds and noble metal solutions) and catalysts with precious metals or containing precious metals as active substances, subject to actual user condition
- Basic customs duty on spent catalyst or ash containing precious metals imported for recovery of precious metals reduced from 12.5 % to 11.85% subject to certificate from Ministry of Environment, Forest and Climate Change
- Basic customs duty on all goods falling under heading 7118 increased from 10% to 12.5% by increasing the tariff rate of all goods falling under this heading
- GIFT IFSC has an approved Free Trade zone for housing vaults. It already has 19 insurance entities, 40 banking entities. It has also provided for setting up of precious metals testing laboratories and refining facilities.With the approval of the regulator, GIFT City would set up an International Bullion exchange(s) in GIFT-IFSC as an additional option for trade by global market participants.This will enable India to enhance its position worldwide, create jobs in India and will lead to better price discovery of gold.