Duty Reduction On Gemstones Vital For Industry Growth

Our guest writer, Ramsaran Tambi, Partner, Swastic Exports (Emerald Mines Group), Jaipur, presents a short wish list of the coloured gemstones industry prior to the Budget.

The gems and jewellery industry forms an important pillar of our Indian economy, contributing  up to 7% of India’s GDP and forms around 12% of India’s exports.

The outbreak of the deadly virus Covid-19 has shaken up the entire world and impacted different industries across the board. The exports in the gems and jewellery industry also saw a decline of about -11.04% during the financial year 2019-20, which was further aggravated by the global lockdown situation.

Being a luxury sector, the first industry to be affected was ours as people started to focus only on procuring  essential commodities during the lockdown. This paradigm shift in the world majorly affected our industry and resulted in a widespread disruption of global supply chains and a slowdown in international demand due to the pandemic.

Ramsaran Tambi

Thrust on E-commerce

With the outbreak of the pandemic, the digital revolution exploded in every industry — as each sector sensed a growing prospect of e-commerce trade. In the gems and jewellery sector, too, the Council transformed the way we do business by organising virtual buyer-seller meets and IIJS Virtual — an idea whose time is just ripe!

However, from the policy point of view, the much-required intervention in terms of friendly e-commerce policies will help the industry reach out to different geographies in a much more convenient and cost-effective way.

Presently, Indian exports are mostly focused on business-to-business trade. If e-commerce is promoted in our sector for business-to-consumer trade, it would result in a much higher value addition as small and medium manufacturers will be able to reach consumers directly by cutting down the intermediaries. Convenience and cost-effectiveness are two factors that will drive business. For instance, the USA, one of the major markets for the gems and jewellery industry, levies 0% Customs duty on any consignment valued below $800. Thus, for e-commerce exports, new opportunities are available in the US market.

It is suggested that in order to take advantage of this e-commerce boom government intervention is much required who can help us in providing schemes and social reforms to do business at ease.

A phased and well-thought strategy is needed to restore the sector and faith of the people in this economy.

Coloured Gems & Taxation

Another priority area is to focus on the taxation policy of the gems and jewellery industry. This sector is impacted by a very high import duty as compared to other countries like Thailand and China. This makes it very difficult for us to compete with companies worldwide. 

The basic Customs duty on rough coloured gemstones like ruby, emerald, sapphire and other forms of rough is 0.5%. The import duty on cut and polished precious gemstones is 7.5%.

In contrast, in Thailand there’s no duty on imports of gemstones, be it precious or semi-precious stones. These stringent conditions on the import of the gemstones make it very difficult to do business in India and hence people in this industry prefer to move to a business friendly market.

The GST rate for rough diamonds, rough precious and semi-precious stones is 0.25% which is reasonable in order to do business, but for products like natural or cultured pearls, precious or semi-precious stones, precious metals, and imitation jewellery, the rate is 3% which is comparatively high and makes it expensive for the business to sustain.

It is imperative for the government to recognise gems and jewellery as a thrust sector and give wage and interest subsidies and customised packages for export. It is also suggested that the Government must include this sector under a special category for easy grant of bank loans/limits for the smooth working of this sector. Further, we believe that with the help of Government intervention in doing business, more opportunities can be created and worldwide business can be attracted to India, which can help in the growth of the industry.

Turning the Sector More Organised

Our sector also plays a critical role in employment generation. We have skilled workers who are blessed with exceptional creativity. The sector is largely unorganised and it is difficult to make sure that the parity in payment terms and essentials in living facilities are provided to these labourers. Due to these disadvantages, these skilled artisans prefer to migrate to other industries where the payment and living standards are much better. This unorganised way of doing business in the gems and jewellery sector is also one of the major reasons that the new generation of these skilled artisans prefers to move to more organised sectors. Proper sustainable reforms and attractive social benefits will help stem the attrition.

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