February 3rd, 2020 – By Rajesh Asnani
The industry had demanded a major cut in import duty on gold but instead a 0.5% import duty has been imposed on uncut colored stones which at present is imported tax free.
The Union Budget has been a major setback for Jaipur’s Gems and Jewellery industry which has an annual turnover of about 3500 crores. This glittering industry had demanded a major cut in import duty on gold as a means to revive their trade which has suffered big time in recent years due to global recession, demonetization and GST.
However, far from any reduction in import duty on gold, Budget 2020 has imposed a 0.5% import duty on uncut colored stones which at present can be imported tax-free. As a result, the cost of precious and semi-precious color stones is estimated to rise by about 1% and Consumers will now have to shell out more for jewellery studded with rubies, emeralds, sapphires and all kinds of colored gemstones. This could see a further drop in sales as jewellery items become more expensive.
According to Kailash Mittal, the President of Sarafa Traders Committee, Jaipur, the government has ignored the jewellery industry in the Budget : ‘‘There is a possibility of adverse impact on the jewellery business and exports and a drop in the domestic market since the prices of color stones and jewellery will now shoot up. Due to color stones becoming more expensive, the color stone and jewellery exporters of Jaipur will be forced to increase the prices of their goods and in such a situation, it will be difficult to compete with exporters of countries like China, Hong Kong and Bangkok.’’
Industry experts say the 0.5% import duty imposed on the uncut colored stones will directly affect the work of one lakh artisans in Jaipur. According to the data of the Gem and Jewellery Export Promotion Council, colored stones worth about Rs 2,500 crore are exported from Jaipur every year. Apart from this, colored stones worth about Rs 500 crores are sold domestically.
Jaipur is a major centre for turning rough, uncut stones into polished, sparkling gemstones and thousands of skilled local artisans are involved in the process of converting the rough stones into finished color gems which is majorly exported. However, due to the duty being introduced now, jewellery traders are likely to reduce the quantity of import of rough stones. This will reduce the employment of artisans and several colored stone processing units could be forced to lay off many of their employees. This will reduce the total quantum of gemstone business and both exports and employment may be adversely affected. According to Jewelers Association Treasurer Raju Mangodiwala: ‘‘Jewellers have been badly disappointed by Budget 2020. While import duty on gold has not been reduced, the new duty being imposed on uncut colored stones will directly affect exports.’’
The claims that the Budget has reduced import duty on platinum from 12.5 to 7.5 per cent is seen as no big relief by Jaipur jewelers. They say that what they needed was a reduction in the import duty rate on gold and silver but that was not changed at all. Instead, the reduced import duty on platinum will not benefit Jaipur’s jewellery industry as Platinum Jewellery accounts for only about one per cent of the total jewellery business in the Pink City.
Already, experts point out that this year, jewellery business is down by 35% over the previous year due to rising prices of gold and silver. In view of this, jewelers had demanded the government to reduce import duty and GST to make gold-silver cheaper and boost the jewellery business but the government has ignored the demands of jewellers. According to estimates, before the implementation of GST, Jaipur used to have a jewelery business of Rs 18,000 to 20,000 crore rupees annually, but the jewellery business has come down sharply in recent years and due to lack of business, many small jewelers are going out of business.