The jewellery exporters body has also demanded for scrapping the existing 80:20 scheme, which was imposed by the government in August last year, under which nominated agencies are allowed to import gold on the condition that 20 percent of the inward shipment will be exported.
"We have requested the government to re-look at the policy and create a level-playing field for Indian jewellers by reducing import duty on gold and silver to 2 percent," GJEPC Chairman Vipul Shah said.
"At present, the 10 percent duty as applicable makes the operations of smuggling economically viable. If the import duty is rolled back then the menace of gold through smuggling route will not be any productive and hence the leakage will be prevented," GJEPC said in a presentation to the Finance Ministry.
If the import duty is reduced then it will also bring down the transaction cost of exports, Shah said, adding that now it is appropriate time to scrap 80:20 scheme as current account deficit (CAD) is under the required limits.
The gems and jewellery exports fell by about 9 per cent to US $39.5 billion in the last fiscal from US $43.34 billion in 2012-13, mainly due to decline in imports of raw gold and silver.
In the pre-budget presentation, GJEPC also pointed out that imports of both gold and silver dipped 40 per cent to US $33.46 billion in 2013-14.
In August last year, the government had raised import duty on gold and silver to 10 per cent to curb the surging imports and burgeoning CAD.
Meanwhile Shah told reporters in Mumbai that GJEPC has asked for a re-look at the CAD situation.
"We have asked the Finance Minister to re-look at the CAD situation in the country and to reduce import duty on gold and silver to 2 percent from 10 percent in the upcoming budget. This will help the supply and boost manufacturing," Shah said.
The import duty roll back will also help in checking the grey market, he added.
The sector, Shah said, also requires a simplified tax regime so the government should introduce presumptive tax, which will bring India at par with peer manufacturing centres like Israel, Thailand and China.
Presumptive tax is a form of assessing tax liability using indirect methods such as income reconstruction or by applying base-line taxation across the entire tax base.
Presumptive methods of taxation are thought to be effective in reducing tax avoidance as well as equalising the distribution of the tax burden.
The export body has also asked the government for establishing Special Notified Zones (SNZ) for import and trading of rough diamonds, where net income is fixed and taxes are paid only on invoices raised to Indian companies, Shah added.