Author: Paul Ploumis10 Jun 2015 Last updated at 07:55:09 GMT
NEW DELHI (Scrap Monster): Local gold jewellery business in India is passing through difficult times, stated All India Gems and Jewellery Trade Federation (GJF). The domestic players in the country are seen facing tough competition from Indonesian exporters.
In accordance with the Free Trade Agreement (FTA) between India and Indonesia, the exporters are required to pay only 1% duty on imports of gold jewellery imported from Indonesia. On the other hand, gold jewellery imports from other countries attract a duty of 10%. The low import duty has resulted in flooding of domestic market with gold jewellery imported from Indonesia. As per rough estimates, nearly 4 tonnes of jewellery is imported to India from Indonesia.
The cheaper imports from Indonesia have hampered the domestic gold jewellers in the country, noted Manish Jain, Chairman, GJF. Import of raw gold normally attracts 10% duty. Along with cess and VAT, the total duties could go up to 12-13%. Considering 4% making costs, gold jewellery made in India turns out to be much expensive than those imported from Indonesia. This has left the industry at crossroads, with many workers feared to lose jobs on falling demand for Indian jewellery.
As per government data, gold imports from Indonesia too have surged significantly during recent months. Trade sources indicate that importers melt the imported gold jewellery and sell it as raw gold. Also, domestic jewellers tend to melt the jewellery imported from Indonesia and makes new products out of it since it is found more profitable than making jewellery out of imported raw gold.
In addition, the government decision to make PAN card requirement mandatory for all gold jewellery transactions exceeding Rs 1 lakh if feared to dampen the domestic gold jewellery business in the country. Although the new rule was supposed to be implemented from June 1st, the decision has not been implemented yet. GJF believes that the rule is likely to come into effect soon. If implemented, organized gold jewellery retailers will be hit badly.