Wednesday, March 2, 2016
Indian jewellers are going on strike after the government imposed a one per cent excise duty on gold jewellery as part of its ongoing efforts to reduce imports of the precious metal.
The budget, unveiled on Tuesday (29 February), also left the controversial 10 per cent import duty for gold in place – something the market had been hoping would be reduced. The unpopular tax was originally levied in 2013 and there had been a lull in the domestic gold buying market leading up to the budget, as consumers waited to see whether taxes would be reduced.
But Indian Finance Minister Arun Jaitley did not cut the tax and now his imposition of the gold jewellery duty has set him against the country’s jewellers.
The India Bullion and Jewellers Association reacted to the announcement by calling an indefinite strike. The last time the Indian government moved to impose an excise duty on gold jewellery in 2012, it was forced to backtrack when jewellers took industrial action.
Indian gold imports are second only to China’s internationally, and according to Reuters, the amount of bullion brought into the country accounts for around a quarter of India’s annual trade deficit.
Mr Jaitley’s decision not to reduce the import duty and the imposition of the gold jewellery tax were accompanied by an increase in the import duty on semi-pure gold doré bars, to 8.75 per cent from 8.0 per cent.
Importing doré and then refining the gold contained in it had been a cheaper option than bringing pure gold into India, but the increase in duty means that once the costs of refining are taken into account, that may no longer be the case.
Association of Gold Refineries and Mints secretary, James Jose, told the Economic Times: "This budget is detrimental to the refining industry in the country. We will approach the finance ministry on this issue immediately."