Union Budget signifies that the Government is moving towards a policy and system based administration; towards transparency and objectivity in decision making; towards targeted delivery; and a formal economy. It is a progressive and transformational Budget that will take India to the next phase of socio-economic growth. India has considerably improved its policies, practices and economic profile and this Budget will go a long way in further enhancing this position.
Hon. Finance Minister announced a series of measures with respect to the agriculture economy, farmers, rural population, youth, poor & underprivileged sections of society, infrastructure, financial sector, digital economy and public service. Hon. FM also offered tax cuts for the middle class and other sections of society. All these measures will drive consumption, which will be favourable to our industry also.
There are several positive takeaways from the Union Budget and yet some areas wrt ease of doing business need to be addressed in the case of the gems & jewellery sector.
Hon. Finance Minister said that India has to focus on our export infrastructure in a competitive world. A new and restructured Central scheme, namely, Trade Infrastructure for Export Scheme (TIES) will be launched in 2017-18. We await the finer details of the same. We require investment in infrastructure like Jewellery Parks all over India to enhance and transform India’s exports of gems & jewellery because of the uncertainty over oil prices and the software IT sector.
Hon. FM spoke about creating an eco-system to make India a global hub for electronics manufacturing. However, the same needs to be done in the case of gem & jewellery sector. Government has to encourage international trading, and make India a global trading hub for diamonds and precious stones to give a boost to local manufacturing.
Hon. FM has announced Special Schemes for the leather, footwear & textiles sector. However, gems & jewellery sector is yet another employment intensive sector with 3 million workforce directly employed in the industry. Government should strongly look at allocating similar schemes for furthering Employment Generation in both domestic and export sector of gems & jewellery. As part of Start Up India, Government should encourage more gem & jewellery export entrepreneurs.
Hon. FM proposed to reduce the income tax for smaller companies with annual turnover upto Rs. 50 crore to 25%. The cut in corporate tax rates for MSMEs based on turnover is a good move. This will benefit a large number of G&J exporters from MSME category.
Hon. FM has announced that there has been substantial progress towards ushering in GST, by far, the biggest tax reform since independence. The gem & jewellery sector emphasizes that the Government should follow the equivalence principle when preparing GST Regime. The gem & jewellery sector requests NIL/ minimal rate of duty on export of diamond under GST regime on the basis of equivalence principle.
Hon. FM spoke about tourism being a big employment generator and having a multiplier impact on the economy. Incredible India 2.0 Campaign will be launched across the world. The Government should promote Made in India jewellery to tourists and encourage sales to tourists. Just as the Government is proposing to open 5 Special Tourism Zones, anchored on SPVs, to be set up in partnership with the States, it should also allow sale and offer specific Exemption on taxation of income from sale of rough diamonds at SNZ (such as Bharat Diamond Bourse). The benefits given to GIFT City can be extended to SNZ too.
Hon. FM has referred to Presumptive Tax for certain manufacturers but one of the big demands of the gem & jewellery exporters has been the introduction of presumptive tax.
In order to reduce the compliance burden due to domestic transfer pricing provisions, Hon. FM proposed to restrict the scope of domestic transfer pricing only if one of the entities involved in related party transaction enjoys specified profit-linked deduction. The gem & jewellery sector requests Government to look at our special demand wherein we had sought certain specific rules in international transfer pricing.
An emphasis on skill development is a welcome move as gems & jewellery is a skill intensive sector. The development of 100 International Skill Centres is a welcome announcement. Adequate funds should be allocated for enhancing the skills of gem & jewellery sector workforce too.
In order to allow companies to use MAT credit in future years, Hon. FM proposed to allow carry forward of MAT upto a period of 15 years instead of 10 years at present. However, this be of very little help for gem & jewellery sector players as most of the manufacturers here have already crossed the 15 year threshold. Hence, the gem & jewellery sector manufacturers still seek abolition of MAT.
In terms of incentivizing domestic value addition Make in India, the indirect tax rate of duty on articles of silver jewellery, other than those studded with diamond, ruby, emerald or sapphire is still NIL/ ZERO subject to the condition that no credit of duty paid on inputs or input services or capital goods has been availed by manufacturer of such goods.
GJEPC welcomed the move of Govt. to prohibit cash transaction more than Rs. 3 lakh to curb black money. Also GJEPC has welcomed the Government’s move to promulgate strong steps to penalize willful defaulters of loans to banks.