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Gem and jewellery seek 2 years tax holiday

February 24, 2010 11:56 IST

Gem & Jewellery industry in India is one of the fastest growing sectors in India with an annual growth rate of 15%. India is also emerging as the world's largest trading center for gold targeting USD 16 billion by 2010. India is the world's largest manufacturing centre for gems and jewellery and the domestic market is estimated to be around USD 16.1 billion in FY09.

India is also largest consumer of gold in the world with nearly 800 tones of gold consumption accounting 20% of the world gold consumption. The Gem and Jewellery industry is classified in to various sub segments like diamonds, colored stones, gold & silver jewellery, pearls etc.

However the two major segments in India are Gold and Diamonds. India dominated the diamond processing trade with 11 out of 12 diamonds being cut and polished in India.

The gems and jewellery industry is a major exchange exchequer as major portion (around 80%) of its turn over was contributed by exports. Diamonds contribute to nearly 80% of the entire turnover and of this industry and hence many times the terms 'gems and jewellery industry' and 'diamond industry' are used as synonyms.

According to the Gem & Jewellery Export Promotion Council (GJEPC) latest statistics, export of cut & polished diamonds rose by 18% to 407.36 lakh carats during 9 months period April-December 09. On the other hand, exports of rough Diamonds fell by 37% to 157.09 lakh carets.

The overall exports of Gems & Jewellery at was up by 43% USD 1892.32 million in December 09 due to voluntarily trade stop on the import of Rough Diamonds for one month (24th November 2008 to 23rd December 2008) resulting in the decline of import and thus the exports. Also the US recession and economic down turn seriously affected the overall Exports & Imports of gem & jewellery during December 2008.

The Industry represented by its apex body has solicited for relief measures from the government to improve its lost competitiveness.

Recommendations from GJEPC:

Recommendations of FICCI:

The Federation of Indian Chambers of Commerce & Industry (FICCI), the largest apex business organization body; on behalf of textile industry has recommended the following:

Recommendations from Gem & Jewellery Trade Federation:

All India Gems and Jewellery Trade Federation (GJF), is the nodal and the largest single trade body in India representing Gem & Jewellery industry. The industry has put forth its issues for consideration as follows:

Import duties:

Direct taxes:

Analyst expectations

Extension of tax holiday for 2 more years will help the industry to reconcile its lost export sheen on the back of Global economic melt down. Reduction of import duty on gold and jewellery will also enhance India to come close with the international design and its manufacturing abilities.

A special allocation of budget for education and Training & development will help the labor-intensive industry for improving technical abilities in jewellery.  However, much of these expectations are not likely to be fulfilled considering the over-riding economic considerations and the need to withdraw economic stimulus.

Companies to watch:

Rajesh Exports, Gitanjali Gems, Titan Industries etc

Outlook:

Gem & Jewellery Industry has been badly hit by the Global economic melt down particularly in the exports of rough diamonds to US and EU nations. A higher raw material cost is putting pressure on the thin operating margins of the industry in many directions.

Thus incentivizing the export-oriented sector will help the industry to garner its lost sheen. Replacement of existing tax with presumptive tax regime will facilitate the gems and jewellery sector.

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