The Union Ministry of Finance issued a notification last night announcing a sharp increase in duty drawback rates for gold and silver jewellery effective today, in a move that is expected to make exports more viable for those who opt for drawback route.
The drawback has been raised from Rs 272 to Rs 372.9 per gram of gold jewellery, and effectively covers 86.74 per cent per cent of the import duty paid, up from 63.27 per cent earlier. For silver jewellery, the drawback has been raised from Rs 3,254 to Rs 4,332.2 per kg, covering 83.53 per cent of duty paid from 62.74 per cent earlier. The calculations based on current tariff value.
Surendra Mehta, National Secretary, Indian Bullion and Jewellers Association (IBJA), said, "Duty drawback is now almost 87 per cent of the duty amount, compared with 63 per cent earlier.
Lower drawback was affecting our exports. The increase is an extremely positive step for those opting for duty drawback. Exports had reduced after gold and silver prices began rising and the government raised duty and tariff value of gold and silver without increasing duty drawback."
India exports gold jewellery worth $1 billion a month. Apart from drawback, two other routes for gold and silver jewellery export are available. One is replenishment and other is the import of gold under the advance authorisation scheme. However, the government had said a month ago that advance authorisation would not be issued for export of gold medallions and coins or any jewellery/articles manufactured by fully-mechanised processes.
Under advance authorisation, exporters were allowed to import gold duty-free if it was used for making jewellery that would eventually be exported. Following reports that the scheme was being misused, the government restricted its use in a move that would hurt genuine exports. This is what seems to have acted as a trigger for increasing drawback rates.
IBJA had also written to the government in August that exports had been rendered unviable as rates were quite low. This anomaly has largely been corrected now.