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Union Budget Favourable for Gold but Detrimental for the Diamond & Gemstone Industry Owing to Doubling of Customs Duty to 5 Per Cent
While announcements for gold seemed positive, the industry mourns the Government’s decision to increase customs duty to 5 per cent on polished diamonds as well as gemstones.
By: Diamond World News Service
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Feb 1 2018 5:23PM
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Reference: 16048  

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Presenting his fifth straight budget in the Lok Sabha today, Finance Minister Arun Jaitley made an array of announcements that are particularly favourable for the Agricultural sector. While this is indirectly a good news for the jewellery industry, the initiative to increase import duty on diamonds and gemstones has left the industry dissatisfied.  

The industry’s expectations from Budget 2018 were mainly focused on import tax cut. As a matter of fact, gold was sold at heavy discounts and jewellers were seen postponing purchase of jewellery as they were expecting the government to reduce import duty. However, the status quo of import duty on gold remains to be unchanged based on the recently announced Budget by Finance Minister Arun Jaitley. However, the Government has decided to increase import duty for polished diamonds and gemstones, which has come as a shocker to many.

“The industry is very disappointed with the government’s decision to double customs duty on cut and polished diamonds as well as gemstones. We were in fact expecting a reduction in customs duty on Gold, which has been on the cards, to regularize business and increase exports. However the 12 per cent contribution of wages to new employees in EPF in all sectors for next 3 years is extremely good for our manufacturers. The announcement regarding creation of comprehensive gold policies and monetization scheme are also very good for our industry,’ says, Pramod Derewala, Chairman, and GJEPC. The council along with the industry is still hopeful and will continue to put forward its demand regarding revoking the increase of import duty for diamonds and gemstones.

The bullion industry, for a long time now has been pushing for a reduction of import duty to prevent smuggling.  However, the announcements regarding having comprehensive gold policy, simplifying gold monetization scheme and streamlining of gold spot exchange are certainly a welcome change for the industry. Completely satisfied with the budget, Surendra Mehta, National Secretary, IBJA said, ‘I am extremely happy with the budget that was just announced. IBJA was concerned about three things – New gold policy, spot gold exchange and ease of gold monetization schemes. All three were favoured in the budget. It is excellent for the industry. Also, the favourable policy announced for farmers is good news for our industry; when they make money, they will invest only in gold.’

Speaking on the budget, Saurabh Gadgil- Chairman & Managing Director, P.N.Gadgil Jewellers and National Vice President, said, “The Union Budget FY 18-19 seems to be in the right direction, it is indeed a very welcoming budget by the finance ministry, it lends focused plans of development and upliftment for the agricultural sector. This will give a boost and strengthen agriculture, which is the backbone of our economy; this will have a direct proportional effect on the gems and jewellery industry. This budget has given a clear indication that the ministry feels it is time to clean and organize the gems and jewellery industry by introducing the best practices proposed by Indian Bullion and Jewellers Association. The budget has announced to make provisions for Gold Spot exchange, Gold Deposit account, restructure of Gold Monetization Scheme, and a comprehensive Mines to Market gold policy. Furthermore, the government has welcomed digital payments and has furthered the initiative with Aadhar based cashless payments. The Gems and Jewellery industry was deeply stung by multiple issue in past years, this budget has many positives. We are hoping this budget will bring about the required confidence in the economy and benefit the industry in the long run.’

“The government’s announcement that it will formulate a comprehensive gold policy to establish gold as an asset class is ground-breaking. The establishment of regulated gold exchanges is exceptionally positive towards making gold a mainstream national value-added asset. A stable policy environment and a fair and effective trading market will bring much needed transparency and stability,” said Somasundaram PR, Managing Director, India, World Gold Council.

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