Many of the expectations were not fulfilled, but the cut in customs duty on rhodium has been cut from 10% to 2%, but the customs duty on gold, silver and platinum has been hiked The Union Budget has partially addressed only some problems of Gem and Jewellery Industry and also left no rejoices for Jewellery players. Some of the provisions in the budget that could have a direct and indirect bearing on the sector are as follows-
Budget Provisions
- Basic customs duty of Rhodium - a precious metal used for polishing jewellery is reduced from 10% to 2%.
- The basic customs duty on gold ore and concentrates was reduced from 2% advalorem to a specific duty of Rs 140 per 10 grams of gold content with full exemption from special additional duty. Further the excise duty on refined gold made from such ore or concentrate is reduced from 8% to a specific duty of Rs 280 per 10 grams.
- The customs duty on gold and platinum has been increased from current Rs 200 per 10 gm to Rs 300 per 10gm. Similarly, customs duty on silver has also been increased from Rs 1000 per Kg to Rs 1500 per Kg.
- The government has increased Minimum Alternate Tax (MAT) from the current rate of 15% to 18% of book profits.
- The Current surcharge of 10% on domestic companies has been reduced to 7.5%.
- The Government has proposed to introduce GST and DTC w.e.f 1 April 2011.
Budget Impact
The Union Budget has met expectations of Gem and Jewellery industry to very small extent on the account of reduction in customs duty on Rhodium. Besides cutting the import duty on gold as recommended by the industry associations, the government has increased import duty on gold, platinum and silver which took off sheen in the Industry. The cost of manufacturing would also increase as the government has not extended 2% interest subvention to the export oriented Gem & Jewellery Industry. Further, Increase in MAT will affect the companies in the industry as there are only handfuls companies which have with stood Global Economic melt down.
Stock to watch
Gitanjali Gems, Rajesh Exports, Titan Industries.
Outlook
Instead of relief package Gem and Jewellery Industry was given glum extensions by the government in Union Budget 2010. The domestic consumption of gold and silver may go down owing to increase in the excise duty and may in turn affect the skilled workers of the industry. Although the customs duty on rhodium was decreased, no great measures were taken to uplift the competitiveness of the Indian Gem and Jewellery sector.
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