PM Defends Hike in duty

Finance Minister Pranab Mukherjee defended the government's decision to double import duty on gold saying that high imports were straining balance of payments and exchange rate of the rupee. India imported gold and silver worth $54.5 bln in Apr-Feb, accounting for 12.6% of total imports “The import of gold of such magnitude strains balance of payments and affects exchange rate of rupee through impacting supply-demand balance of foreign exchange”, said Mr.Mukherjee
 
I agree to the balance of payment issue that the government is facing via high imports of gold. But double duty is not the right solution to this issue. Gold has always been a popular investment destination for all types of investors, standing out as a tried and true safe haven that generally performs well in times of equity market turbulence, uncertainty as well as an alternative to fiat currencies that have occasionally come under pressure. In India, Gold is bought by almost all classes of society and such a duty will affect the imports and in turn the reserves. It will also lead to an increase in various other illegal modes of gold procurement so as to save the extra costs over it.

Indian households have nearly 25,000 to 30,000 tonnes of Gold. I would suggest Government of India to introduce schemes like minimum tax scheme wherein an investor is charged minimum tax to convert his/her unaccounted gold into an accounted one. By this the government treasury will also increase and the idle gold can be put to use. The other scheme can be a VDS scheme (voluntary disclosure scheme) by which the Gold /Silver can be brought to the market.

There are much feasible solutions available rather than imposing such duties

UNION BUDGET 2012-13- WE STRONGLY OPPOSE IT

Let me first state down the important highlights of the budget with regards to the Bullion, Gem and jewellery Industry-

· Gold import duty has been doubled to 4 per cent
· Excise duty on Branded and non Branded Jewellery has increased by one per cent
· 2 per cent tax on cash sales of over 2 lakh
· Excise duty of 1 percent on silver branded jewellery has been removed.

Budget 2012 has been a disappointing one. We strongly oppose this budget.

It will create a negative impact not only for the bullion and jewellery dealers but also for the common man.

The government had increased duty in December on gold and silver. This itself hampered the bullion business. An additional 2 percent increase of import duty on gold has worsened the situation, not only for bullion industry but also for the common man.
We can say that government has levied this duty on the common man. Increase in gold prices along with this increase in duty- how will the common man survive?
Gold is tradition, gold is culture. Gold is bought not only on auspicious occasions and weddings but also as an investment. Its is rightly said “save money to invest in gold”

To explain in layman terms,
1. Duty is variable.
2. Yesterday, if an individual would have bought 100gms Gold at 27,300/-(10gms quote) i.e. 2,73,000 for 100gms. The duty was 5,600. As per today’s declaration, the duty is almost double i.e. 11,200. Now the same gold quantity for the same price is valued higher by 5,600 i.e. 2,78,600 for 100gms.

Such moves of the government will create a slump in the market.

Moreover, Imports are expected to fall by 50% in the next 6 months.
This move will result in smuggling and opening up of other illegal channels to get gold in India.

I totally oppose this budget. The only positive point is the removal of excise duty on silver branded jewellery. But will that really help?
The next thing that can help our industry is that this extra revenue generated through increase in duty is used by government for creating new hallmarking centres, research and development in mining sector.
The Bullion, gem and jewellery industry needs to be more organized.

GST has been postponed to October. We insist the government to implement GST the earliest. If implemented, it is expected to provide a significant boost to investment and growth of the economy. GST will have a significant impact on almost all aspects of businesses operating in the country, including the supply chain, sourcing and distribution decisions, inventory costs and cash flows, pricing policy, accounting systems and transactions management. A flat 1% across India should be levied by the government, which would replace most indirect taxes currently in place.

With increasing competition from China, the government should have encouraged the development and promotion of BRANDED Jewellery in the International market, for the long term sustainable growth of the Gems & Jewellery Sector. However, the increase in excise duty will hamper the growth of this sector.



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