Mumbai: India’s resurgent gem & jewellery industry, which benefited from the government’s stimulus spending, is hoping for an extension in sops and improvement in credit facilities to help increase competitiveness.
The industry, which contributes about 13% of the total export earnings of the country, had been hit severely by the drop in demand during the global economic downturn.
The government in its 2009 Budget had extended a 2% interest subvention scheme for exporters till March 2010.
“Despite that reduction, our interest rates are still higher than international rates so this stimulant should not be withdrawn and should be made permanent,” said Vasant Mehta, chairman of the Gem & Jewellery Export Promotion Council (GJEPC).
The industry has also sought further extension in the income tax exemption given to Export Oriented Units and units in Special Economic Zones beyond March 2010.
Union finance minister Pranab Mukherjee will unveil the general Budget on 26 February and is expected to begin gradually withdrawing of concessions granted in 2009 to lift economic growth amid global turmoil, a Reuters poll showed.
The sector, which is a key foreign exchange earner, has demanded for easy availability of dollar financing by way of setting up a foreign exchange fund to become more internationally competitive.
“We are a import based export industry because we don’t produce diamonds here. We suffer a great deal because the exchange rate differs so we are demanding a foreign exchange fund so that we can import in dollars and export in dollars,” said Sabhyasachi Ray, director at GJEPC.
“The value of the fund should be about $2-4 billion fund,” he said.
SEZ to domestic markets
GJEPC has also asked that exporters in SEZ’S be allowed to sell some of their stock in the domestic markets, when they have a surplus stock as demand in the domestic markets remain robust.
“Exporters in SEZs should be permitted to send some part of the product to the domestic market on payment of appropriate duties on raw materials without tax on labour costs,” said Mehul Choksi, Chairman and Managing Director, Gitanjali Gems Ltd.
“Also definition of jewellery SEZ’s should be broadened to include all accessories with precious metals or studded with precious stones,” said Choksi, who is also the chairman of the FICCI Gems & Jewellery Committee.
The industry has also proposed the levy of a 1% turnover tax in place of all forms of current taxes and has asked for tax-free status for income on export earnings for two years.
“With the turnover tax the industry basically wants to be taxed on their turnover and not on their profits. This will help get rid of the multiple assessment procedures which causes disputes on taxation,” said a Mumbai-based consultant.