The gems and jewellery industry is disappointed with the finance minister's proposals. While the FM announced reduction in basic customs duty on precious and semi-precious coloured stones from 10 per cent to two per cent, he levied four per cent excise duty on silver manufactured from smelting zinc or lead. However, the import duty on gold has not seen any increase, as expected by the market.
The jewellery sector is now awaiting the foreign trade policy (FTP), which the commerce ministry is likely to announce next month.
"We believe Budget 2013-14 provided only some 'corrective' measures for the import duty on pre-form precious stone, but it is a very small component of the entire industry. We are now eagerly awaiting the reforms announcements in the FTP," said Vipul Shah, chairman of Gems & Jewellery Export Promotion Council.
The sector's demand for a benign tax regime through levy of presumptive tax (a uniform small tax on turnover in place of all other taxes) was not granted.
The excise duty on silver manufactured from smelting zinc or lead is to bring the rate on par with the excise duty applicable to silver obtained from zinc ores and concentrates. This will affect the profitability of domestic silver producers such as Hindustan Zinc (HZL) and Binani Zinc (BZL).
Silver production from smelting of zinc was hitherto exempted from excise duty to encourage the domestic smelting sector.
"The excise duty relief was just a cost subsidy on processing of locally mined concentrate. The excise levy would discourage local smelters," said Vinod Juneja, managing director of BZL.
The Anil Agarwal-controlled HZL, largest producer of virgin silver in India, will be the most affected. Overall, the firm's silver production is estimated at 353 tonnes for FY13 and 380-400 tonnes for FY14.
Meanwhile, bullion dealers heaved a sigh of relief with the FM keeping import duty on gold unchanged at six per cent. Also, the duty-free limit of import of jewellery was raised to Rs 50,000 for men and Rs 100,000 for women carrying gold during travel.