f you are looking to purchase gold jewellery, you can expect
If you are looking to purchase gold jewellery, you can expect at least a 6-7 per cent increase in their prices.
This is because the Union Budget has proposed the duty on gold imports to be doubled to 4 per cent and excise duty on refined gold to be hiked from 1.5 per cent to 3 per cent.
As the justification for enhancing these duties, the Finance Minister, Mr Pranab Mukherjee, said, “One of the primary drivers of the current account deficit has been the growth of almost 50 per cent in imports of gold and other precious metals in the first three quarters of this year.”
“I have been advised to strengthen the steps taken to check this trend,” he said. Gold and silver imports during April 2011-February 2012 had touched $55 billion, registering a 38.5 per cent growth over the same period in the last fiscal.
‘Move may lead to gold smuggling'
Recalling that the Government had hiked the import duty on gold from 1 per cent to 2 per cent only in this January, Mr Rajiv Jain, Chairman, Gems and Jewellery Export Promotion Council, told Business Line that the Budgetary proposals would mean a 400 per cent hike on the commodity from pre-January 2012 levels.
“The 4 per cent import duty on gold will encourage all kinds of unethical practices. The country will go back to the preliberalisation era when gold smuggling and money laundering prevailed,” he said.
Mr Jain said the low duty on gold till the last year had helped in bringing more businessmen to the organised gems and jewellery sector from the unorganised.
He said while earlier excise duty was imposed only on branded jewellery, the Budget now has covered all kinds of jewellery under excise. “We had asked the Government to do away with excise duty,” he said.
No impact on exports
However, gems and jewellery exports will not be impacted as the refund of duties through the duty drawback mechanism will take care of the increase in the Customs and excise duties. “But domestic prices of gold jewellery will go up by at least 6-7 per cent,” Mr Jain said.
Also, the budgetary proposal to fully exempt branded silver jewellery from excise duty (of 1 per cent) will result in an increase in the number of branded silver jewellery items. Currently, there are only a few brands in that segment.
Significantly, Mr Mukherjee said in his speech that, “To prevent round-tripping, it is proposed to impose basic Customs duty of 2 per cent on cut and polished, coloured gem stones at par with diamonds.”