Disappointed with the budget retaining the customs duty on gold, the most important raw material for the gems and jewellery exporters, is pinning its hopes on the Foreign Trade Policy (FTP) to be released tomorrow, an ASSOCHAM paper said today.
The sector which employs lakhs of people in designing, making, retailing of jewellery is also apprehensive of the requirement of quoting PAN card for every purchase of gold jewellery over Rs 1 lakh.
"This is un-workable", especially in rural and semi-urban areas. The PAN allotment is complete only in the urban and that too major cities, the chamber paper noted with concern.
As regards import duty, the industry was expecting the Government to reduce the duty since it was felt that by majority of the respondents in the ASSOCHAM survey of the sector, in the absence of lower duty, smuggling of the precious material would shoot up.
"In any case, smuggling of gold is on the higher side. The risk to the Balance of Payment situation was also not much since the Current Account Deficit is well within control", ASSOCHAM Secretary General Mr D S Rawat said.
The Jewellery sector had been seeking a cut in the import duty, which will increase the supply of gold and also curb illegal imports.
According to the paper, there are genuine concerns among the domestic industry and the retailers about the PAN becoming a major irritant for the sale of the jewellery.
While the intention to restrict the cash transaction was understandable, the stakeholders felt that the move is difficult to adhere to as PAN would not be available with everyone, this is especially true for farmers residing in remote Indian villages.
Ahead of the Foreign Trade Policy, the gems and jewellery sector there was need for special jewellery parks in line with SEZs in different parts of the country.
GST is a welcome step but high service tax will negatively impact jewellery sales.
The respondents indicated that the gold monetization scheme announced in the Union Budget will increase the supply and help in reducing imports of the precious metal. Banks and other dealers would also be able to monetize this gold.
Majority of respondents also feels that the introduction of gold sovereign bonds will contribute towards growth of Gems & Jewellery sector.
The Sovereign Gold Bond will carry a fixed rate of interest, and will also be redeemable in cash in terms of the face value of the gold at the time of redemption by the holder of the bond.