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GJEPC not too happy with Union Budget reforms
The Council feels the Budget may not be very encouraging for the gem and jewellery industry
By: Diamond World News Service
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Jul 8 2009 7:20PM
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Reference: 3980  

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The Gem and Jewellery Export Promotion Council (GJEPC) expected more than what was delivered in the recent Union Budget announced by India’s Honorable Finance Minister, Shri Pranab Mukherjee. The Council believes the Union Budget has not incorporated enough measures to strengthen India’s leadership position in the International gem and jewellery market. Mr. Vasant Mehta, Chairman of the GJEPC mentioned on the budget that “The recession has not only debilitated the Industry from inside, but has also led it to the precipice of non-competitiveness and loss of market share. Exclusion of certain significant, corrective measures sought by the G&J industry from the Union Budget may slow down the revival of this sector and will lead to a setback in the export market.”

Sometime prior to the Union Budget being announced, the GJEPC had interacted with the Finance Minister with an outline of suggestions to leverage the industry. The Council had proposed - increasing the flow of dollar liquidity from the foreign exchange reserves of the country, to meet a projected need of at least $3-4b in the coming year.; levy of a flat 1 percent Turnover Tax in place of all forms of current direct taxes, thereby doing away with arbitrariness, confusion and delays in finalisation of tax returns, making income on export earnings as tax-free for the next two years; export credit limits sanctioned by the banks as on 01 April 2008 to exporters of the Gem & Jewellery Industry should have been continued till 31 March 2011; introduction of a duty draw back scheme for Gold Jewelry exports; and setting up of a long-term welfare fund jointly with the Government, to provide employment guarantees, training and other benefits to workers.

At present the Indian gem and jewellery industry is facing challenges, including threat from the growing influence of a highly competitive China; worldwide fall in demand; the increasing unemployment of its highly skilled and world-class workforce; and the volatility of Gold prices. The Union Budget was successful in addressing some measures like - extension of existing 2 percent subvention on pre-shipment credit till March 2010; exemption on payment of service tax by the exporters on certain services; withdrawal of import duty on rough coral; extension of 1 year to the Sunset Clause to SEZs and EOUs; abolition of excise duty on branded jewellery; abolition of FBT and exemption of Service Tax on the activities of the Council.

The GJEPC is worried some Budget announcements could discourage growth for the industry: the extension of 2 percent subvention on pre-shipment credit till March 2010; which is a very short period of extension and the ideal period should have been 2 years; domestic funding should have been facilitated at internationally competitive rates (LIBOR based) as opposed to the high interest rates being charged by the Banks at present; increase of duty on gold and silver would hurt the Domestic Gems & Jewellery market and impact smaller exporters procuring gold from the market.

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