So finally, the most over hyped financial event just got over. The media has already started going gung ho over the so called benefits and disadvantages of the budget. Several the associations and industry biggies come out with statements and Voila! The financial khichdi is ready to rule the newspapers and their digital mediums for the next couple of days.
Ask a good financial analyst you will know that the budget day is genuinely overhyped. However the budget does come out with the direction that the government wants to go towards. And there have been very few aspects that would directly affect the gems and jewelry industry. Let us directly jump on to the implications of Budget 2023 on the gems and jewelry industry.
Reduced import duty on LGD seeds
India has quickly become a hub for growing and manufacturing lab grown diamonds (LGDs). One of the methods of growing LGDs is Chemical Vapour Deposition (CVD) which uses a grown diamond seed to further create gem quality LGDs. These seeds are usually imported from China.
The government has proposed to reduce the import duty on these LGD seeds from 5% to Nil. This is to showcase incentive and support to the gems and jewelry industry with respect to LGDs.
Coming to the impact of this proposal, on the ground this will barely affect the government budget. With today’s advanced technology, the CVD seeds are re-usable and also in the process of being grown in India itself on a large scale. Hence the import of such seeds is almost negligible and would keep reducing over time. Therefore, the reduction of this import duty on LGD seeds would barely have any impact to the gems and jewelry industry.
Increase in import duty of jewelry articles to 25%
The next up is the increase of cutom duty on jewelry articles from 20% to 25%. Now, jewelry is majorly manufactured in India and exported to several countries around the world. India in creasing it’s share in jewelry exports and is among the top three countries.
However, that does not mean India is not importing jewelry. India imports good amount of imitation, fashion and some fine jewelry from countries such as China, Hong Kong, Thailand, etc. Hence an increase in customs would discourage buyers in India to import and look for local suppliers. This in turn gives a small boost to the “Make in India” campaign. Indian gems and jewelry manufacturing is well capable to match the quality of such jewelry that are usually imported. The jewelry industry should take this as a positive change.
Reduction and increase is equal to Nil
The import duty on gold was 15% including basic duty, cess, AIDC, etc.
The government decreased the basic custom duty from 12.5% to 10% while increasing the Agriculture Infrastructure and Development Cess making the tax rate go back to 15%. In short, no change. Just gimmicky.
The government has stated that they will incentivise the industry to support e-commerce exports of jewelry. This is a welcome decision if the government acts on this promise quickly. There is huge potential for Indian jewellers and manufacturers to bring the D2C model outside India.
For only the Gems & Jewelry industry, these were the only measures. However, there are several regulations and laws struct down to enable ease of doing business and several measures to increase digital India’s reach. These infrastructural changes will definitely increase the Total Addressable Market of the Jewellers in India.
Let’s not get carried away too much and continue business as usual. Unusually!