The Gem & Jewellery Export Promotion Council (GJEPC), a pivotal institution fostering the growth and development of India’s illustrious gem and jewellery sector, played a crucial role in a significant pre-budget consultation. A high-level delegation from the GJEPC participated in an interactive session with Dr. Hasmukh Adhia, the then Finance Secretary to the Government of India, in Mumbai on December 14, 2017. This crucial meeting convened a select group of stakeholders, including prominent business leaders, representatives from financial services, and key figures from various trade and industry bodies and associations, all gathered to contribute to the nation’s economic policy formulation.
The primary objective of this assembly was to gather comprehensive proposals and insightful suggestions from the trade and industry, alongside other vital stakeholders. These discussions were integral to the budget preparatory exercise for the Financial Year 2018-19, specifically focusing on direct and indirect taxation policies. The presence of such a diverse group underscored the government’s commitment to inclusive policy-making, ensuring that the voices of crucial economic sectors like gems and jewellery are heard and considered. Dr. Adhia was accompanied by other senior officials, including the Chairman of the Central Board of Direct Taxes (CBDT) and representatives from the Central Board of Excise and Customs (CBEC), alongside other senior officials from the Income Tax department, highlighting the seriousness and depth of the consultations.
The GJEPC delegation, representing the interests of a sector that contributes significantly to India’s exports and employment, was led by its esteemed Chairman, Praveenshankar Pandya. He was supported by a robust team comprising Ashok Gajera, the Regional Chairman for the Western Region, Sudhir Patil, Assistant Manager at GJEPC, and external consultants Nishant Shah and Supreme Kothari from Economic Laws Practice (ELP). This carefully selected team brought together a wealth of industry experience, regional perspectives, and legal-economic expertise, ensuring that the GJEPC’s submissions were well-researched, comprehensive, and impactful.
During the productive interaction with the Finance Secretary, the GJEPC Chairman presented a series of critical issues and strategic recommendations aimed at bolstering the competitiveness, growth, and sustainability of the Indian gem and jewellery industry. These points addressed long-standing challenges and proposed forward-looking solutions, reflecting the industry’s aspirations and its potential to contribute even more substantially to the national economy.
Key Issues Presented by GJEPC to the Finance Secretary:
Presumptive Taxation Scheme (PTS) for the Diamond Industry
One of the foremost recommendations put forth by the GJEPC was the implementation of a Presumptive Taxation Scheme (PTS) specifically tailored for the diamond industry. The diamond sector, a cornerstone of India’s gem and jewellery exports, operates with unique characteristics, including high transaction volumes, often with small margins, and intricate global supply chains. A PTS would simplify the tax compliance process for a significant number of small and medium enterprises (SMEs) within the diamond trade. Instead of detailed accounting and complex audits, a presumptive tax regime allows businesses to pay tax on an estimated income, based on a percentage of their turnover. This approach drastically reduces the compliance burden, saves time and resources for businesses, and minimizes the scope for disputes with tax authorities. For an industry heavily reliant on global trade and efficiency, reducing administrative overheads is paramount. The GJEPC argued that such a scheme would not only foster ease of doing business but also encourage more informal businesses to join the formal economy, leading to a broader tax base and increased transparency. This measure was seen as vital for enhancing the global competitiveness of India’s diamond processing and trading hubs, ensuring that Indian players can operate on a level playing field with international counterparts who often benefit from simpler tax regimes.
Reduction of Import Duty on Gold from 10% to 4-5%
Another critical plea from the GJEPC was for a significant reduction in the import duty on gold, proposing a decrease from the then prevailing rate of 10% to a more manageable 4-5%. Gold is not merely a precious metal but a fundamental raw material for the Indian jewellery industry, which is globally renowned for its exquisite craftsmanship and design. High import duties on gold have historically posed several challenges. Firstly, it makes Indian-made gold jewellery more expensive in the international market, thereby eroding the competitiveness of Indian exports. Buyers from key markets often find it more economical to source from countries with lower raw material costs. Secondly, a substantial duty differential can inadvertently encourage illegal gold imports and smuggling activities, which not only deprives the government of legitimate revenue but also distorts the market, creating an unfair environment for compliant businesses. The GJEPC emphasized that a reduction in duty would stimulate official imports, formalize the gold trade, and provide a much-needed boost to jewellery manufacturers and exporters. It would also help curb the unofficial market, ensuring that the industry operates transparently and adheres to regulatory norms. Furthermore, lower raw material costs could translate into more competitive pricing for domestic consumers, potentially increasing demand and supporting local artisans and retailers. This long-standing demand reflects the industry’s desire for a policy environment that supports legitimate trade and enhances India’s position as a global jewellery manufacturing hub.
Job Work Policy for Diamonds/Coloured Gemstones
The GJEPC also advocated for a clear and streamlined job work policy for diamonds and coloured gemstones. In the gem and jewellery sector, “job work” refers to processes where a principal manufacturer entrusts certain manufacturing or processing operations (like cutting, polishing, or setting) to another entity, often smaller specialized units. India has a vast ecosystem of skilled artisans and specialized workshops that excel in such job work, making it a crucial component of the supply chain. However, ambiguities or restrictive policies concerning job work can create operational bottlenecks, increase compliance costs, and hinder the efficient flow of goods and services within the industry. A well-defined policy would clarify the tax implications (especially under Goods and Services Tax – GST), ease the movement of goods for processing, and provide legal certainty for both the principal manufacturers and job workers. Such a policy is essential for leveraging India’s competitive advantage in skilled labour and craftsmanship. It would facilitate contract manufacturing, encourage specialization, and allow the industry to achieve greater economies of scale and efficiency. A transparent and supportive job work policy is vital for attracting more processing orders to India, boosting domestic value addition, and supporting the “Make in India” initiative within the gem and jewellery sector, ultimately contributing to job creation and economic growth.
Bank Finance to the Gem & Jewellery Industry
Access to adequate and affordable bank finance has been a perennial challenge for the gem and jewellery industry in India. Recognizing this critical bottleneck, the GJEPC highlighted the urgent need for improved financial support from banks. The industry, particularly the diamond and gold sectors, often requires substantial working capital due to the high value of raw materials and long manufacturing cycles. Despite its significant contribution to exports and employment, the sector has sometimes faced perception issues regarding risk from financial institutions, leading to stricter lending norms, higher interest rates, and reduced credit availability. The GJEPC emphasized that robust bank finance, including pre-shipment and post-shipment credit, term loans for modernization, and flexible working capital facilities, is indispensable for the industry’s growth. Enhanced financial flow would enable businesses to invest in advanced technology, upgrade infrastructure, expand manufacturing capacities, and explore new markets. It would also help them manage inventory efficiently and navigate market fluctuations more effectively. The Council urged the government to collaborate with the banking sector to address these financing gaps, perhaps through specific credit schemes, risk mitigation mechanisms, or re-evaluating the industry’s risk profile based on its strong track record and robust regulatory framework. Ensuring easier access to finance is crucial for the industry to maintain its competitive edge, innovate, and contribute meaningfully to India’s export ambitions.
Comprehensive Gold Policy
Finally, the GJEPC presented a compelling case for the formulation of a comprehensive gold policy for India. India is not only the world’s second-largest consumer of gold but also a major player in its processing and jewellery manufacturing. However, the gold sector traditionally operated without a holistic policy framework, leading to fragmented regulations, market inefficiencies, and untapped potential. A comprehensive gold policy would address various facets of the gold ecosystem, from mining and refining to recycling, hallmarking, trading, and financialization. Such a policy would aim to formalize the entire gold value chain, reduce dependence on imports in the long run through encouraging domestic refining and recycling, and establish India as a global gold trading hub. Key components of such a policy would include promoting responsible gold sourcing, enhancing transparency in the market, strengthening consumer protection through universal hallmarking, and encouraging the financialization of gold assets to unlock their economic value. The GJEPC’s vision for a comprehensive policy sought to create a structured and supportive environment that would foster sustainable growth, attract investments, boost exports, and ensure that India maximizes the economic benefits from its deep-rooted cultural and economic affinity for gold. It would streamline regulatory processes, encourage innovation, and pave the way for India to become a price-setter rather than a price-taker in the global gold market.
The interaction between the GJEPC delegation and the Finance Secretary was a testament to the collaborative spirit between the Indian government and industry stakeholders. These discussions were not merely a formality but a critical opportunity for the gem and jewellery sector to articulate its challenges and propose actionable solutions directly to the policymakers shaping the nation’s economic future. The issues raised by GJEPC – from taxation and import duties to financing and comprehensive policy frameworks – are fundamental to the industry’s long-term health and its ability to continue being a significant contributor to India’s GDP, employment, and export earnings. Such detailed consultations are vital for crafting a national budget that is responsive to industry needs, fosters economic growth, and strengthens India’s position on the global stage as a leader in the gem and jewellery trade. The insights gathered from such engagements form the bedrock of policies designed to propel India towards becoming an even more formidable global manufacturing and trading hub for precious gems and exquisite jewellery.
News Source: gjepc.org