Customs Duty Cuts on Jewellery and Platinum: A Boost for Indian Consumption
The recent announcement in the FY26 Budget regarding customs duty cuts on jewellery and platinum parts has sent ripples of optimism through the jewellery industry in India. With the customs duty on platinum parts, commonly referred to as findings, slashed from 25% to a mere 5%, and a reduction in the duty on jewellery from 25% to 20%, industry executives believe this move will significantly enhance consumption.
Impact on Platinum Jewellery Prices
The sharp reduction in customs duty on platinum findings is expected to make platinum jewellery more affordable for consumers. Suvankar Sen, Managing Director and CEO of Senco Gold & Diamonds, emphasized that these steps are timely, especially as the government aims to stimulate middle-class consumption through the Budget. The reduction in prices is anticipated to encourage more consumers to invest in platinum jewellery, which has traditionally been viewed as a luxury item.
Aligning with Consumption Trends
Executives from PN Gadgil Jewellers have echoed this sentiment, noting that in a market like India—where jewellery consumption is robust—duty cuts directly translate to lower prices. This aligns with the broader trend of improving consumption patterns in the country. As disposable incomes rise and consumer confidence strengthens, the jewellery sector stands to benefit immensely from these fiscal measures.
Rising Precious Metal Prices
However, it is essential to consider the backdrop of rising precious metal prices. In 2024, prices for gold, silver, and platinum have surged by at least 20% year-on-year, driven by geopolitical tensions, global economic events, and supply chain disruptions. Experts predict that these prices may remain elevated into 2025, which could temper the impact of the duty cuts to some extent. Nevertheless, the recent duty reductions are seen as a strategic move to counterbalance these rising costs and maintain consumer interest.
Seasonal Demand and Organised Jewellers
The December 2024 quarter proved to be fruitful for organized jewellers, buoyed by festive and wedding season demand. Earlier in July, the government had already reduced the import duty on gold from 15% to 6% to further stimulate demand ahead of the festive season. This proactive approach by the government has been welcomed by industry players, who believe that further duty cuts could sustain the sales momentum for organized jewellers.
Classification of Gold Imports
In addition to the duty cuts, the Budget introduced a new tariff line to differentiate gold imports in bars from those in other forms. This move is significant for the Gem and Jewellery Export Promotion Council (GJEPC), whose chairman, Vipul Shah, expressed support for the proposal. The new classification aims to address issues related to the import of alloys of platinum, which predominantly contain gold. This has been a concern as it led to claims of unwarranted customs duty exemptions under the India-UAE Comprehensive Economic Partnership Agreement (CEPA).
Combating Smuggling and Ensuring Compliance
The classification of precious metals under specific headings in customs tariffs—such as silver with 99.9% purity, gold with 99.5% purity, and platinum with 99% purity—will help streamline the import process and ensure compliance. This is particularly crucial given that Dubai has been identified as a major source of smuggled gold and other precious metals entering India, often through neighboring countries like Bangladesh, Nepal, Myanmar, and Sri Lanka.
Conclusion
The proposed customs duty cuts on jewellery and platinum parts mark a significant step towards enhancing consumption in the Indian jewellery market. While rising precious metal prices pose a challenge, the government’s proactive measures, coupled with the seasonal demand for jewellery, are likely to create a favorable environment for both consumers and organized jewellers. As the industry adapts to these changes, the focus will remain on ensuring compliance and combating smuggling, ultimately fostering a more transparent and robust jewellery market in India.
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