The Gem and Jewellery Export Promotion Council (GJEPC) has requested the government to consult with industry stakeholders following the recent increase in gold import duty. The council emphasized that higher duties do not decrease imports but instead raise prices and promote smuggling. Despite the duty hike, gold imports have not decreased, and gold prices have nearly doubled in recent years without a corresponding drop in demand.
The industry body expressed concerns that the elevated duty rates would escalate costs for exporters and add pressure to working capital requirements. The government has raised the basic customs duty on gold to 10% from 5% and increased the Agriculture Infrastructure and Development Cess (AIDC) to 5% from 1%. This move has necessitated exporters to provide bank guarantees of around Rs 28-30 lakh per kilogram of duty-free gold sourced from Nominated Agencies, leading to significant working capital blockage.
GJEPC cautioned that the impact of these changes would be particularly severe on micro, small, and medium enterprises (MSMEs), which constitute nearly 80% of its membership and are already facing liquidity challenges. The council highlighted that higher import duties could fuel gold smuggling and elevate export costs for the domestic jewellery sector.
Recognizing the government’s concerns regarding rising imports, GJEPC disclosed that it has initiated discussions with major retailers and manufacturers. Additionally, the council has corresponded with Prime Minister Narendra Modi, proposing various measures to reduce gold imports without adversely affecting the industry. Among the suggestions put forth are the promotion of lower-carat jewellery like 18-karat and 14-karat products, which could potentially lower imports by 20-30%.
Furthermore, the council recommended incentivizing old-gold exchange programs and revitalizing the Gold Monetisation Scheme to tap into India’s estimated 25,000 tonnes of household gold reserves. GJEPC disclosed that it is formulating a comprehensive proposal to revive the Gold Monetisation Scheme, which will be submitted to the government shortly. The council urged policymakers to engage in dialogues with the industry to devise sustainable solutions that harmonize fiscal goals with export expansion.
