India’s gems and jewellery industry wants the government to announce several measures in the budget that would make buying gold and jewellery more customer-friendly. Key among the measures sought include allowing jewellery purchases through equated monthly instalments, just like one can buy consumer durables, reducing credit card commissions on transactions as well as making the gold monetisation scheme of the government more attractive.
Over the last few years, the gems and jewellery industry has gone through various speed bumps. Import duty on gold was raised to 10 per cent in 2013, as the then UPA government looked to reign in the current account deficit and a depreciating rupee. Requirement of PAN card was made mandatory for gold and jewellery purchases over Rs 2 lakh. Demonetisation in 2016 also hurt sales as cash transactions came down.
Jewellers say there is a need to revisit some of the past measures.
According to latest available data, customs authorities siezed 3,223 kilograms or Rs 974 crore worth gold in the year-ended March 2018. Reduction in the gold import duty will directly reduce smuggling of the yellow metal, say officials of the All India Gem and Jewellery Domestic Council (GJC).
Importantly, the council wants the gold monetisation scheme (GMS), introduced by the government in 2015, to be made more attractive, which will also help the country reduce gold imports, and in turn help contain trade deficit.
“GJC has suggestions to make the gold monetary scheme more effective and benefit the government and citizens at large,” said Anantha Padmanaban, chairman of GJC.
Among the suggestions is to raise the interest rate on long-term gold deposits under the gold monetisation scheme from the current 2.5 per cent. Government could also give exemptions to households for minimum 500 grams of gold deposited under the GMS, being of ancestral nature, from being questioned by the tax department, GJC officials said.
Such moves would unlock household gold reserves of up to 24,000 tonnes, which is much higher than India’s annual gold requirement of 650-700 tonnes, said Padmanaban.
According to the GJC, loan taken for purchase of jewellery is treated as personal loan, where the interest rates tend to be high. The industry body instead wants EMI facility to be made available for purchase of jewellery, although restrictions could continue for bullion and coin purchases.
Also, said Shaankar Sen vice-chairman of GJC, credit card commission levied by banks should be reduced to 0.20 per cent, a move that would boost digital transactions for the purchase of gold and jewellery.
Furthermore, given the increase in gold and jewellery prices over the years, the GJC has also recommended raising the limit required to furnish PAN card for jewellery purchases to Rs 5 lakh from the current Rs 2 lakh.
Meanwhile, officials say jewellers continue to face difficulty in raising credit from banks, even after furnishing high level of collateral. Following the alleged fraud at Punjab National Bank by diamantaire Nirav Modi last year, banks had reduced their exposure to the sector and were not willing to lend more.
Padmanaban says very few new loans are being sanctioned by the state-owned banks, while the non-banking finance companies too have shut the door. GJC officials say the need was to judge the individual jewellers on a case by case basis and not paint the sector with the same brush. They plan to discuss the matter with the finance ministry as well as the Indian Banks Association.