Relax gold import norms, slash import duty to 2pc: GJF

The government should slash import duty on gold to 2 per cent from the existing 10 per cent and relax other shipment norms as the jewellery sector is facing "worst-ever crisis", industry body GJF said today.
Gold availability will be hit as imports of precious metal are expected to be not more than 550 tonnes this fiscal, down from 845 tonnes last year, All India Gems and Jewellery Federation (GJF) said in a statement.
The Centre hiked import duty on gold to 10 per cent and made it mandatory for traders to export 20 per cent of the imported gold with a view to contain the current account deficit. It also banned import of bullion coins, bars and medallions.

Asserting that the industry is facing "worst-ever crisis" due to existing curbs, GJF Chairman Haresh Soni said: "Gold should not be single handedly held responsible for CAD.
"We demand an immediate abolition of the 80:20 formula for gold import. We also demand a reduction in gold import duty to 2 per cent."
The 80:20 rule has made jewellery import cheaper and difference between finished products and raw materials has reduced to five per cent, he said.

"Government should keep a minimum of 10 per cent gap between raw material and finished goods to keep trade alive. Create a fair open market controlled business," he said.

The body also demanded that the government should distribute 25 per cent of custom duties collected from gold and diamond imports to encourage manufacturing and exports.
Soni said that the current gold policy has jeopardised the entire demand and supply chain in the domestic market. "Due to this, financing cost of gold for jewellers has risen to 12-13 per cent, against 2-3 per cent in neighbouring countries."
He said that there is "no assured regular supply of gold" in the domestic market since the entire control of gold import is in the hands of banks and nominated agencies.
The 80:20 gold import formula is not "feasible" as this rule has created more paperwork and confusion, thereby causing delays in customs clearances, he added.

That apart, Soni said, the cost of exports has risen substantially due to huge Bank Guarantee that exporters now have to keep as a cover for 10 per cent import gold duty.
GJF mentioned that the jewellery manufacturing has come to a "standstill" in India, the world's largest gold importer, while it has risen sharply in the neighbouring countries from where jewellery is being smuggled.