Mon, 23 Jan 2023 01:24 PM IST
THE ORGANIZED gold jewellery retailers are urging the finance minister to cut gold import duty in the Union Budget 2023-24 as any reduction in duty will help curb gold smuggling, boost exports of gems and jewellery, and empower organised jewellery retailers to cash in on the surging domestic demand.
Emphasizing the industry's views, Malabar Gold & Diamonds founder and chairman MP Ahammed says India needs a robust gold policy that rationalises import duty and the gold retailers are expecting a favourable decision from the Centre in this regard.
"Liberalizing imports will boost the organised domestic jewellery business," says Ahammed. He believes that the domestic gold demand, especially in rural India, is robust and rationalising import duty and standardising domestic gold prices across the country will further increase consumption.
"The import duty reduction will act as a growth multiplier for the gems and jewellery industry as it will boost growth in jewellery exports and drive up retail gold sales, which will eventually boost the government's tax collections," he said.
In major economies like the US, UK, China, Singapore, Malaysia and GCC countries, gold imports do not attract any duty. It effectively disincentivizes illegal transactions on gold, say industry sources. "The higher duty encourages large-scale duty evasion and incentivizes gold smuggling. In India, 15 per cent import duty, 3 per cent GST and other charges are levied on gold. The effective tax rate of nearly 18 per cent makes smuggled gold cheaper by INR 250-300 per gram," explains the Malabar Gold chairman.
Notably, gold imports to India are also falling. In 2022, the import was 706 tonnes, and in 2021 it was 1,068 tonnes. In December 2022 alone, a decrease of 79 per cent was recorded in gold imports. However, the fall in imports doesn't signify a domestic demand slowdown. It implies that a sizable portion of the domestic demand is met through smuggled gold. Unofficial sources say annually around 4,000 tonnes of gold is smuggled into the country. The gravity of losses to the exchequer is enormous. "So, we expect the upcoming Union Budget to propose a reduction in gold import duty and introduce a digital monitoring system to track movements of gold in the supply chain," said Ahammed. Moreover, the gold sourced through legal channels will help the retailers ensure quality standards and trade transparency.
Significantly, the December trade data show a slide in the country's merchandise exports due to global recession fears. The industry is of the view that it is the right time to slash import duty to give a major fillip to the gems and jewellery exports. India is currently in the sixth position in terms of global jewellery exports.
"The industry needs more export incentives from the government to compete against leading jewellery markets like the UAE, Switzerland and Hong Kong, and to further enhance the country's share in the global jewellery business. We have the capability to become a major jewellery-making hub in the world. We must focus on the idea of 'Make in India, Market to the World'. The sector achieved USD 39 billion in exports in 2021-22. This fiscal year, it is all set to touch USD 45 billion," added Ahammed.