gold, jewellery, ornaments, bangles

Gold jewellery exports from India have come to a grinding halt the past two weeks due to non-availability of the metal for fabrication.

Trade sources said banks and nominated agencies responsible for bullion import have halted the entry of gold since implementation of the Goods and Services Tax (GST) effective July 1. They fear the government’s decision to levy three per cent GST on bullion and jewellery with full input credit would hurt their profitability and block working capital on every gramme of gold they sell.

With reduced supply, all jewellery manufacturers, save those with some existing inventory of gold, have stopped production and exports completely. The development is significant, as gold jewellery accounts for nearly 18 per cent of the overall annual gems and jewellery export worth $40 billion and employs nearly a million skilled and unskilled workers, directly and indirectly.

“Banks and nominated agencies have halted bullion import,” said Sabyasachi Ray, executive director, Gems and Jewellery Export Promotion Council.

A senior official of a leading bullion importer said on condition of anonymity, “In the pre-GST regime, we paid only import duty of 10 per cent on gold, and passed it on to consumers. We would now stay away from importing as capital will be blocked for paying IGST.”

Representatives of banks and nominated agencies have expressed their concerns to the ministry of finance and urged that they recommend the GST Council find a solution.

The official further said, “We will not resume gold import till the government assures us to compensate the notional loss, as we import gold and sell to our consumers sometimes in a fortnight.”

Gold jewellery exporters have also been hit since early this year due to levy of five per cent import duty in West Asia from January 1. Many Indian jewellery exporters were using Dubai for re-routing consignments to European and African countries and their shipment there has declined sharply.

“Many jewellers have set up a manufacturing facility in Dubai and neighbouring countries, to avoid import levy. Many governments in the Middle East are planning to levy value added tax from January 1, 2018. So, gold jewellery exports from India face many challenges. Since the excise duty levy last year, jewellery manufacturing has become more difficult in India, which will worsen with the levy of GST,” said Rajiv Popley, Director, Popley & Sons, a Mumbai-based large gold jewellery manufacturer and exporter.



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