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Union Budget 2010-11 announced
Gold, silver and platinum to be costlier
By: Diamond World News Service
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Feb 26 2010 7:11PM
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Reference: 4702  

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The Finance Minister Pranab Mukherjee announced a slew of tax reforms while presenting the Union Budget for the fiscal year 2010-11 in the Lok Sabha on 26th February, 2010. The finance minister has stated that the budget belongs to the farmer, agriculturist, the entrepreneur and investor.

Synopsis of the budget

Major highlights of the budget include –

Direct Tax Code and Goods &Services Tax to be implemented from April 2011

Introduction of Companies Bill 2009 to address issues related to regulation in corporate in context of changing business environment

Extension of interest subvention of two percent for one year for exports covering handicrafts, carpets, handlooms and small & medium enterprises

Government committed to ensuring continued growth of SEZs to draw investments and boost exports and employment

Reduction the current surcharge of 10 percent on domestic companies to 705 percent and simultaneously increasing the rate of MAT from 15 percent to 18 percent of book profits

Businesses having a turnover exceeding Rs. 60 lakhs are required to have their accounts audited. Similar provisions also apply to all professions whose receipts exceed Rs. 15 lakhs

Custom duties of gold and platinum have increased from Rs 200 per 10 grams to Rs. 300 per 10 grams. Custom for silver has increased from Rs. 1000 per kilo to Rs. 1500 per Kg

From the prevailing rate of 10 percent the custom duty for Rhodium has reduced to two percent

To encourage domestic refining capacity for gold, there is a reduction of basic customs duty on gold ore and concentrates from 2 per cent ad valorem to a specific duty of Rs.140 per 10 grams of gold content with full exemption from special additional duty. Further, the excise duty on refined gold made from such ore or concentrate is being reduced from 8 per cent to a specific duty of Rs.280 per 10 grams

Service tax to remain at 10 percent

RBI will issue additional banking licenses to private companies and NBFCs

FDI policy will be user friendly by compiling all guidelines into one document

Fiscal deficit pegged at 6.9 per cent in 2009-10 as against 7.8 per cent in the previous fiscal. Fiscal deficit seen at 4.8 per cent and 4.1 per cent in 2011-12 and 2012-13 respectively

Rs 1,900 crores have been allocated for Unique Identification Authority of India

A unique identity symbol would be provided to the Indian Rupee in line with US Dollar, British Pound Sterling, Euro and Japanese Yen

National Social Security Fund for unorganised sector workers

An extensive skill development programme in textile and garments sector and leveraging the strength of existing institutions and instruments of the Textile ministry.

The industry responds

When asked on how friendly is the budget for the gem and jewellery sector, Prasad Kapre, Co-Chairman Federation of Indian Chambers of Commerce and Industry said, “On a scale of one to ten, I would rate this budget at six or seven. There are a couple of expectations that have not been met. Because of the overall crises in the export market, there were expectations from the SEZs that certain levy would be given to the domestic markets. This has been asked by the industry for the last five years. However, nothing much has happened. In addition, certain subsidies on duty drawback were one of our demands. However, nothing has been done on that front. Interest subvention of two percent though only for one year is a positive and so is the reduction of duty on Rhodium. I would say it is a mixed bag budget for the industry.” He further added that while the National Social Security fund where Rs.1000 crores has been allocated to various sectors. However, there is no mention of the gem and jewellery sector in the list.

According to Vedant Jatia, Director, Indian Institute of Jewellery, “If I would have to do a micro-analysis of the budget for the gem and jewellery I would say finance minister has played sort of a spoilsport. But if I have to look at the macro-analysis of the budget where the entire nation is concerned, the finance minister mentioned that the supply and demand chain has to be both looked into and there is stability in the chain. He is going to use his packages to ensure the chain in check. He also mentioned the world economy is collapsing and all countries are facing challenge how to get out of this. Looking at the budget, I think he has safeguarded the economy by protecting all entities. But for gem and jewellery industry I don’t think it is a trade budget overall.”

Talking about the concessions on importing gold ore and its impact, Prem Kothari, Co-Chairman – Education and Talent Development Committee, GJF, quotes, “The positive side of this budget is they have allowed import of gold ore at concessional rate. This would help in importing gold in India and minimise the smuggling aspect. Today there is a monopoly of Swiss and German companies and the gold bars sold in India are Swiss or German bars. Now the situation would change with the availability of Indian gold bars and once that happens the apprehension of gold smuggling will ease out.” On the inclusion of g&j industry in the skilled development programme, he says, “There is a package government has offered for skilled development. That is also very important for the gem and jewellery industry. If one is looking for a growth in 10 percent in a stimulant economy, there would be a tremendous growth of the gem and jewellery business in India and abroad. So we require lot of skilled workers to produce jewellery. So the gem and jewellery industry should also be included in the package for skilled development and avail of the benefit to upgrade their skills.”

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