Tax benefits for leather, gems & jewellery likely in Budget

Government is considering a package of tax incentives for the labour-intensive leather and gems and jewellery sectors in the forthcoming Budget to provide a boost to manufacturing as well as exports. Leather and leather goods sector is a focus area under the 'Make in India' initiative of the central government and the aim is to increase its exports to USD 15 billion by 2020 from the current USD 6 billion. The Commerce and Industry Ministry in its suggestions for the Budget 2016-17, has recommended several initiatives including elimination of customs duty on imported leather machinery from about 26.5 percent currently, sources said.

It has also sought excise duty reduction for all leather and non-leather goods of up to Rs 2,000 and increase in the abatement rate to 35 percent from 25 percent. These suggestions, if implemented, will help in assisting technology upgradation, capacity modernisation, expansion of manufacturing sector and achieving the USD 15 billion exports target, sources said. Council for Leather Exports Chairman Rafeeq Ahmed said that the sector employs about 3 million people and support is required to boost the sector.

"Big expansion plans are there in the sector and for that imported machinery is required because 95 percent of the machinery for tanning and footwear is imported," he said. Footwear currently attracts an excise duty of 12.5 percent. For gems and jewellery, which is also the thrust sector under the 'Make in India' programme, the industry has asked to raise customs duty to 15 percent from the current 10 percent and abolish the excise duty from the current rate of 6 percent on imitation jewellery.

The suggestions assumes significance as the popularity of Indian imitation jewellery across the globe is increasing and there is a huge demand in countries including the US and Europe. "Extending the tax benefits to the sector will enable competitive manufacturing in the country and also boost exports," sources added. Finance Minister Arun Jaitley will unveil the Budget on February 29.

Contracting for the 13th month in a row, India's merchandise exports fell 14.75 percent in December to USD 22.2 billion due to a steep fall in shipment of petroleum products and engineering goods amid tepid global demand.