16-Aug-2013
The latest round of customs duty hike made import of finished jewellery cheaper than manufacturing ornaments in local factories with imported gold. Consequently, jewellers have started importing finished jewellery instead of gold to sell directly in their retail stores.
In fifth such instances in 20 months, the government raised import duty on gold by 2% on Tuesday to 10% from less than one% in January 2012.
The latest round of duty hike brought import duty on gold at par with finished jewellery. Considering one% value added tax (VAT) the overall duty works out to around 11.5% on both gold and finished jewellery.
Hence, it makes sense for jewellery retailers to import finished ornaments than the bullion and incur additional conversion cost which will make domestic origin jewellery costlier.
“Jewellers have started passing on orders for finished jewellery now to overseas companies which makes sense at equal import duty of 10%. Orders started flowing to companies in Thailand and Italy,” said Vipul Shah, chairman of Gems & Jewellery Export Promotion Council (GJEPC).
With this, local manufacturing units in gems and jewellery segment have started facing the heat. Many of the them have initiated job cuts while others await till the revival in demand.
“We will soon meet the commerce ministry to apprise with the situation as our own manufacturing units are facing problems with this decision. Hence, we would request the ministry to raise import duty on finished gold jewellery to keep a wide differential for safeguarding our domestic manufacturing units,” said Shah.
Jewellery manufacturing cost works out to 10% of the cost of ornaments. specifications, Controller of Explosives
Source:- www.business-standard.com
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