Budget 2022 | Gems and jewellery sector has little to cheer about

Prices for the yellow metal in 2021 remained range-bound, declining around 10 percent from the previous year when it hit a high of Rs 56,200 per 10 gm.

Except a small relief for diamond traders, the jewellery industry has not benefited much from Budget 2022. While there is no change in the import duty of gold, that on cut and polished diamonds has been brought down to 5 percent from 7.5 percent.

The Budget said customs duty on cut and polished diamonds and gemstones is being reduced to 5 percent in a bid to “boost the gems and jewellery sector. Simply sawn diamond would attract nil customs duty.”

“This will offer only a small relief to the trade as cut and polished diamonds constitute only 5 percent of the total imports of diamonds into the country. There is no change in the 10 percent duty on unpolished diamonds that comprise the rest,” said B Govindan, southern zone chairman of the All India Gem and Jewellery Domestic Council.

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Polished diamonds are of 1 carat or more which may cost Rs 5-6 lakh. Govindan said the majority of trade happening in India is of diamonds ranging from Rs 50,000 to 60,000 which are under one carat. “The unpolished diamonds are imported and polished in places like Surat. The labour charges for polishing are quite high in the Western countries,” he said.

Another announcement in the Budget was: “To facilitate export of jewellery through e-commerce, a simplified regulatory framework shall be implemented by June this year. To disincentivise import of undervalued imitation jewellery, the customs duty on imitation jewellery is being prescribed in a manner that a duty of at least Rs 400 per kg is paid on its import.” But the industry doesn’t think this will have a major impact.

The gold industry was expecting a cut in the import duty of gold and a reduction in goods and services tax (GST) to bring down smuggling and increase official sales. Though the duty was cut to 7.5 percent from 12.5 percent in the last budget, the infrastructure and social welfare cess add another 3.25 percent. The GST is 3 percent on gold, which takes the total duty to 13.75 percent for the customer.

Prices for the yellow metal in 2021 remained range-bound, declining around 10 percent from the previous year when it hit a high of Rs 56,200 per 10 gm. In the international market, a higher dollar rate was the reason behind falling prices, with inflationary pressure in the US failing to provide support.