India’s Finance Minister Pranab Mukherjee delivered his budget speech for the fiscal year 2009-2010. The budget has brought forth a mix bag of goodies for the gem and jewelry sector. The centrifugal force of these changes and developments has been the global economic slowdown, and the budget has addressed changes in exports, employment, branded jewelry and metals.



Leveraging exports



- To encourage identifying and developing new markets for Indian exporters, the Allocation of the Market Development Assistance Scheme has been increased by 148 percent to 1.24 billion rupees.



- Deadline of the 2% interest subvention on pre-shipment credit has been extended from September 30, 2009 to March 31, 2010.



Boost for branded jewelry



- Excise duty on branded jewelry has been abolished



- Gems, jewelry and textiles have received tax holidays, but gold and silver now bear a higher customs duty



Gold and silver become dearer



- At present, customs duty on gold bars is Rs 100 per ten grams and on other forms of gold (excluding jewelry) is Rs.250 per ten grams. With the new tax imposition, custom duty on gold bars will be hiked to Rs 200 per ten grams and on other forms of gold to Rs 500 per ten grams.



- Customs duty on silver (excluding jewelry) will be increased from Rs 500 per kg to Rs 1,000 per kg. These duties are applicable on gold and silver, including ornaments that are not studded.



- The change in customs duty on gold and silver has been effected after it was revised in 2004. The government is hopeful that this increase will control the volatile increase in gold prices as has been seen in the recent past



Infra



The exemption clause for the Units in the Free Trade Zone has been extended by one Year, i.e. financial year 2010-11.





Industry Responses:



The budget has seen a mixed reaction from the trade and governing trade bodies.



On leveraging of exports:



Vasant Mehta, Chairman GJEPC noted that “We are not happy as the expectations have not been met. As any recession takes at least two years to recover, the extension of 2% subvention should have been increased to two to three years instead of the said six months.”



On branded jewelry:



Dharmesh Sodha, Director, WGC India opined that: “This is a retrograde step by the government because branded jewelry is a premium product offering benefits to the consumer. Going off the excise is a good thing that has happened to the industry.”



Printer, added that “Excise Duty on Branded Articles of Jewelery has been reduced from 2 percent to nil. This is really going to make prices competitive in terms of the jewellery segment.”



On gold and silver:



“The increase does not have a major impact as it is an increase of Rs. 100. However it could have been avoided given the tough economic times that the Indian retailers has been going through in the recent times,” added Mr. Sodha.