Indian jewelry sector urges govt to reduce gold import duty
Indian gold demands declined 24% in Q32017 after witnessing three quarters growth. This has hampered the earnings of this sector.
- India's gold import duty stands at 10%
- Gold imports may exceed over 700 tonnes this year
- India's gold demand declines 24% in July- September 2017 quarter
With demand for yellow metal continues to decline, Indian jewelry sector has knocked the doors of government to provide them some relief from higher import duty.
A recent data showcased that India's gold import declined by 16% in value terms to $2.94 billion in October month, compared to $3.5 billion in the corresponding period of the previous year due to drop recorded in the festival season.
Praveenshankar Pandya, chairman of Gem & Jewelry Export Promotion Council in New Delhi, said, “India needs to reduce import tax on gold to 4%-5% from current 10%; higher tax hurting local jewelry sector. Shipments hurt by a slowdown in global demand, levy of 5% import tax by UAE, GST.”
Pandya believes that India's gold imports may exceed up to 700 tones in this fiscal, while exports can reach at $43 billion in the same period.
Currently, jewelers are charged with 10% of gold import duty in India.
Minister of Commerce and Industry Suresh Prabhu recently stated that the government is working on a package in consultation with the gems and jewelry industry to boost export and create jobs in this labour intensive sector.
The ministry has already asked the industry body to come out with a proper business plan to promote the growth of the sector.
Prabhu told a news agency, “We have some time left, in another few weeks we have to finalise it as Budget will be in February, so we have to work on that.”
Indian gold industry is facing lots of pressure as both import and demand are witnessing decline hampering their earnings.
A World Gold Council report said that India's gold demand fell by 24% to 145.9 tonnes in the third quarter (July – September) 2017 versus demand of 192.8 tonnes a year ago same period.
Somasundaram PR, Managing Director, India, WGC said, “India's gold demand was down... as the newly introduced Goods & Services Tax (GST) and anti-money laundering legislation (AML) around jewellery retail transactions deterred gold buyers.”
The WGC further said that headwinds for demand in gold continues, following various measures since early 2016 to boost transparency. They expect full year demand in 2017 to be well below the 5-year average, estimating between 650 to 750 tonnes, the lower end of the range being more likely.
Motilal Oswal, however, says that a mix of long-term factors (growing population, rising income levels and higher proportion of millennials), and short-term factors (inflation, gold price movement and excess rainfall) will lead to an increase in gold demand in the country.
Meanwhile, the GJEPC expresses hope that Finance Ministry may also provide support for technology upgradation and setting up of gems and jewellery parks in the country and streamline labour rules to support this sector.
India is the second-largest jewelry market in the world after China.