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BUDGET Exclusive: India’s fiscal budget for 2009-10 is a mix of good and bad news.
While exports is encouraged, gold and silver is attracting higher customs duty
By: Diamond World News Service
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Jul 6 2009 7:20PM
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Reference: 3973  

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India’s Finance Minister Pranab Mukherjee delivered his budget speech for the fiscal year 2009-2010. The budget has brought forth a mix bag of goodies for the gem and jewellery sector. The centrifugal force of these changes and developments has been the global economic slowdown, and the budget has addressed changes in exports, employment, branded jewellery and metals.

Leveraging exports

-To encourage identifying and developing new markets for Indian exporters, the Allocation of the Market Development Assistance Scheme, has been increased by 148 percent to 1.24 billion rupees.

-Deadline of the 2 percent interest subvention on pre-shipment credit has been extended from September 30, 2009 to March 31, 2010.

Boost for branded jewellery

-Excise duty on branded jewellery has been wiped out.

-Gems, jewellery and textiles have received tax holidays, but gold and silver now bear a higher customs duty.

Gold and silver become dearer

-At present, customs duty on gold bars is Rs 100 per ten grams and on other forms of gold (excluding jewellery) is Rs.250 per ten grams. With the new tax imposition, custom duty on gold bars will be hiked to Rs 200 per ten grams and on other forms of gold to Rs 500 per ten grams.

-Customs duty on silver (excluding jewellery) will be increased from Rs 500 per kg to Rs 1,000 per kg. These duties are applicable on gold and silver, including ornaments that are not studded.

-The change in customs duty on gold and silver has been affected after it was revised in the year 2004. the government is hopeful that this increase would control the volatile increase in gold prices as has been seen in the recent past.

Education

The budget has also shown some respite in the cost of educational loans.

Infra

Exemption clause for the Units in the Free Trade Zone have been extended by one Year, i.e. financial year 2010-11.

INDUSTRY VOICES:The budget has seen a mixed reaction from the trade and governing trade bodies.

On leveraging of exports:

Vasant Mehta, Chairman GJEPC noted that “We are not happy as the expectations has not been met. As any recession takes at least two years to recover, the extension of 2 percent subvention should have been increased to two to three years instead of the said six months.”

On branded jewellery:

Dharmesh Sodha, Director, WGC India opined that “This is a retrograde step by the government because branded jewellery is a premium product offering benefits to the consumer. Going off the excise is a good thing that has happened to the industry.”

Printer, added that “Excise Duty on Branded Articles of Jewelery has been reduced from 2 percent to nil. This is really going to make prices competitive in terms of the jewellery segment.”

On gold and silver:

“The increase does not have a major impact as it is an increase of Rs. 100. However it could have been avoided given the tough economic times that the Indian retailers has been going through in the recent times.” added Mr. Sodha.

On Education and infrastructure:

Tehmasp Printer, Managing Director of International Gemological Institute(IGI) adds, “Granting interest break on educational loans taken for vocational purposes could mean that now it is easier to take educational loans for taking courses on gemology, grading, sorting, jewellery designing.” Printer, also mentioned that “The sunset for the exemption clause to Units in Free Trade Zones has been pushed ahead by one more year , i.e. financial year 2010-11. This makes profits earned in these zones exempt from being subject to income tax for one more year.”

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