India increased customs duty on gold and silver jewelry from 10 percent to 15 percent, in a bid to protect the interests of domestic manufacturers, the finance ministry said in a statement on Tuesday.
“To protect the interests of small artisans, the customs duty on articles of jewellery and of goldsmiths’ or silversmiths’ wares and parts thereof is being increased from 10 percent to 15 percent,” an official statement said.
The government had raised the customs duty on primary gold and silver imports to 10 percent, through three duty revisions this year alone, bringing it on par with the duty on gold and silver jewelry imports at 10 percent, before the latest hike.
“The customs duty on articles of jewelry had not been increased in line with the changes in duty rates on gold, silver and platinum since January 17, 2012,” the official statement said, adding that different duty rates between the raw metal and finished product is essential to protect the domestic jewelry-making industry against cheaper machine-made imports from other countries.
“Jewelry making is a labor intensive industry. Millions of artisans are dependent on this sector for their livelihood. …There is an apprehension that Indian jewelry makers would not be able to compete with cheaper imports, particularly when majority of the imported jewelry is machine-made as compared to handmade jewelry in India.”
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The domestic jewelry industry had been demanding the hike in duty, pointing to its vulnerability against the import of cheaper jewelry from countries such as Thailand and Malaysia.
“It is a very fair decision and will help protect the domestic industry from foreign jewellery makers," Ashok Minawala, former chairman of the All India Gems and Jewellery Trade Federation, told The Indian Express.
The latest move comes ahead of the festival season in India, which begins in October and typically pushes up the demand for gold, silver and jewelry made from precious metals.
The government last raised the import duty on gold and silver on Aug. 13, as part of its measures to contain a widening current-account deficit, which reached a record 6.7 percent of gross domestic product, or GDP, in the third quarter of 2012-13, weakening the domestic currency. India’s current-account deficit for the 2012 fiscal year stood at 4.8 percent of GDP, which is estimated to be far above the sustainable level of 2.5 percent.
India is the world’s largest buyer of gold and the country imported a record 162 tons of bullion in May. The precious metal is the biggest non-essential item in India’s imports list and weighs on India’s current account balance. However, jewelry articles constitute less than 5 percent of total gold imports.
The recent measures, including the curbs on gold imports have brought down the value of gold imports to $650 million in August, from $ 2.2 billion in July.