Mumbai, Jul 5: The gems and jewellery industry is disappointed with the Union Budget 2019-20, saying the increase in customs duty will negatively impact the sector, encourage grey market and make jewellery more expensive in the domestic market.
All India Gem And Jewellery Domestic Council chairman N Anantha Padmanaban told PTI here that the increase in customs duty and GST will hike the prices by 15.5 per cent, which will benefit the grey market.
“Smuggling is already on the rise and this move will further boost the grey market, which will provide 4-5 per cent discount making it attractive for consumers. We expect the grey market will increase by 30 per cent,” he said.
Padmanaban said, the all industry bodies are planning to meet the finance minister next week to request immediate roll back of hike in customs duty.
Echoing a similar view, World Gold Council Managing Director, India, Somasundaram PR said “Today’s announced import duty hike on gold from 10 per cent to 12.5 per cent will negatively impact India’s gold industry. It will impede efforts to make gold as an asset class particularly when gold prices are already rising globally.”
In addition, he said, the grey market will thrive which will dilute efforts to reduce cash transactions.
Gems and Jewellery Export Promotion Council vice chairman Colin Shah said the Budget 2019-20 is very disappointing for the industry.
“This move will harm the exports of gold jewellery, increase the cost of doing business and smuggling will grow,” he added.
IBJA director national vice president and PNG Jewellers CMD Saurabh Gadgil said, the hike in customs duty will have a dampening effect on the market.
“However, the push for digitalisation and the shift to a cashless economy will strengthen the organised players in the industry, creating transparency and positive impact market sentiment. The introduction of zero tax liability for those in the Rs 5 lakh income will also align with our expansion in tier II-III markets, and augurs well for the industry as a whole,” he added.
ABans Group of Companies Chairman Abhishek Bansal said the increase in import duty indicates the government’s move to discourage imports of physical gold and promote digital gold in the form of ETF’s, gold bonds among others.
“Gold demand in India may drop further, as gold prices are already at multi-year highs and jewellery will become unfordable to small pocket households,” he added.
Malabar Gold and Diamonds chairman Ahammed MP said, the finance minister’s decision to hike the import duty on gold will be a double whammy for the gold retail industry, a segment which is critical for creating the much needed jobs for the economy.
“This is because on the one hand it will lead to a substantial increase in input costs of the industry sending the retail prices up and hitting sales. On the other hand, it will provide a stimulus for illegal shipment of gold into the country,” he said.
Therefore, the government should reconsider this move as its long pending demand of the industry to lower the import duty on gold to 5 per cent level to make illegal trade in gold unattractive, he added.
Kalyan Jewellers chairman and managing director T S Kalyanaraman said the increase in customs duty on import of gold is likely to affect short term sentiments on gold buying, and lead to an increase in the illegal supply of gold in the market.
However, the inter changeability of Aadhar and PAN card will help consumers tremendously when it comes to purchasing luxury items like jewellery,” he added.
Geojit Financial Services head – commodity research, Hareesh V said, the custom duty hike on gold will certainly lift gold prices in the country.
“Since the domestic prices are already at multi-year highs due to a weak rupee and higher international prices, the new decision would cause an additional burden on buyers. The hike in customs duty and the 3 per cent GST will present a total tax incidence on gold at about 15.5 percent this will lead to higher prices for gold in the country,” he added.
Keyur Shah, chief executive officer, Muthoot Exim said hike in customs duty on gold might not help curb ongoing illegal entry of gold into the country. It may nevertheless, help shore up government revenues required for infrastructure and social sector spends.
“The Indian consumer will perhaps consider it as an normal increase in gold prices as it usually happens over a period of time that in turn it may strengthen consumer belief that gold always appreciates and acquisition of gold as an asset may increase. It may eventually be good for gold loan NBFCs,” he added.
