The Changing Dynamics of the Gems & Jewellery Industry
As we bid an adieu to 2017 and welcome 2018, let’s take a look at some of the major developments in 2017 that has created a positive road ahead for the gems and jewellery industry.
The gems and jewellery sector has witnessed numerous challenges in the year 2017. In the first few months the industry was impacted by demonetization announced in November 2016. The highly awaited Budget 2017 was also neutral that focused on digitization and announcement for establishing gold spot exchange which shall boost the sector in terms of bringing uniformity within the industry. GST introduced in June 2017 was accepted as a positive move by the Government to stabilize the industry and address the concerns of the millions employed in the industry. In October, Government revoked the notification that gems and jewellery purchases of `50,000 do not require PAN anymore which was rejoiced by the industry.
Neutral Budget for the sector
The Budget 2017 gave a reason to the industry to smile. Unlike previous budgets this one was neutral with minimal reforms. Digitization and announcement of establishing gold spot exchange in the near future brought a positive vibe within the industry. According to Saurabh Gadgil- Chairman & Managing Director, PNG Jewellers and Director, Indian Bullion Jewellers Association the Union Budget FY 17-18 focused towards development of the sector with ease of doing business and reformation in FDI policies. He added, “. The advent of gold spot exchange will bring a transparent platform where industry will trade locally instead of depending on the international market.”
Budget also imposed an upper limit on cash transactions at `3 lakhs as a move to encourage digitization which received mixed reactions from the industry. Nitin Khandelwal, Chairman, All India Gems & Jewellery Trade Federation was of the opinion that the decision would affect jewellery sales immensely in rural areas with customers having no cheque facility or digital compliant which contributed significantly to India’s jewellery sector. On the other hand few jewellers believed that it would encourage digital transactions.
Union Budget 2016-17 signified that the Government is moving towards a policy and system based administration and a formal economy, which shall take the country to the next phase of socio-economic growth.
GST – The game changer
After the recently concluded budget, the introduction of the most awaited GST rates again created a stir in the industry by introducing the rates at 3 per cent for gold and 0.25 per cent for rough diamonds. This was a landmark announcement as the overall tax burden was kept low keeping in mind, the unique characteristics of the gems and jewellery sector, the kaarigars and small jewellers.
Sharing his views on GST renowned manufacturer of yellow gold jewellery, Punamiya & Sons’ Kamlesh expressed GST to be a very positive move for the B2B businesses as it would do away with the taxation process like VAT etc. He believed the game changing law shall benefit the industry at larger and the industry will take some time for us to get used to it.
World Gold Council Managing Director, India, Somasundaram PR referred GST as the single biggest indirect tax reform in India which is intended to bring transparency, increase tax compliance and improve transaction traceability. He shared that the government’s decision to apply 3 per cent GST on gold was an encouraging step in the current context to stabilise the industry.
Many analysts and industry giants believe that with this taxation, many unorganized players will be encouraged to enter the organized trade and it shall give a thumping boost to the organised players and also benefit the consumers.
Revocation of KYC norms – a sigh of relief for the industry and buyers
Government’s decision revoking an order that mandated PAN and Aadhaar cards for purchases above Rs 50,000 just before the festive and wedding season cheered up the sector. It was a great relief for the industry which resulted in improved sales during Dhanteras and Diwali. It brought a smile not only on the faces of the jewellers but also welcomed by the consumers.
A Road Ahead in 2018
With start of major reforms in 2017, this year seems to bring in more good news for the sector. With the Department of Consumer Affairs committed to introduce Hallmarking regulations, the start of the New Year shall be another move towards creating an organized Gems and Jewellery Sector. The revision of the standards on gold would also ensure that only categories of 14, 18 and 22 carat would be sold in the country.
WGC India Managing Director Somasundaram P R commented, “The gold industry in India is at the cusp of transformation, as transparency, standards and infrastructure begin to define the next phase of reforms. It is time to take hallmarking forward along the path to mandatory enforcement, leaving no room for debate around purity and safeguarding the interests of the consumer.”
With the previous budget reflecting Government’s inclination towards setting up a gold spot exchange, industry traders and analysts are eagerly awaiting for an introduction of an exchange for standardization and transparency in gold trade.
Introduction of Gold Spot Exchange will open up big opportunities in India, Sameer Patil, Senior General Manager at Bombay stock Exchange (BSE) expressed “With exchange the gold industry will get a uniform regulator that will help channelize the trade in the country. It will lead to transparency in prices and small traders can participate in lending and borrowing of gold easily.”
With high likeliness of current gold import duty of 10% to be reviewed in the near future, there are many strong reforms to be expected within the industry in this year however, time shall only be able to the decide the changing fate of the Gems and Jewellery Industry towards becoming a organized sector.