Indian Budget 2022-23: Cutting import duty on cut and polished diamonds can impact domestic industry

Dubai: While the Indian government retained its import duty on gold, that for cut and polished diamonds as well as gemstones have been slashed to 5 per cent from 7.5 per cent.

“Somehow this doesn’t add up – India’s gold and jewellery sector would have benefitted from any reduction in gold import duty costs, which stand at 10.5 per cent now,” said Abdul Salam K.P., Vice-Chairman at Malabar Gold & Diamonds.

“By lowering duty on cut diamonds, it could end up impacting India’s own thriving industry for cutting and polishing diamonds, with Gujarat and Mumbai being the key centres. Lowering import duty will make it difficult for these businesses because there could be heavy competition from cheap imports.”

The higher import duty on gold was brought in to stifle consumption within India, which is the world’s second biggest consumer market for the yellow metal after China. Higher duties, however, has not curbed Indians’ appetite for gold, with 2021 seeing record consumption for jewellery. While much of it had to do with pent up demand after the 2020 lockdowns, the key takeaway is that Indians are not going to let go of an opportunity to pick more.

Stocks gain, swoon and rise

For India’s stock markets, the day started off bright with strong gains, then there was the drop when it was felt that the India Finance Minister’s latest spending programme was not going to cut it. Thereafter, the Sensex is turning red hot, and is currently up 900 points.

“There was an impression among investors listening that FM Sitharaman’s spending focus is on the long-term, and that’s why the markets tanked in between,” said K. V. Shamsudeen, Director at Sharjah-based Barjeel Geojit Financial Services. “Investors, however, seem to have changed their minds after the announcement that the status quo remains on corporate taxes.

“As for NRIs, the Union Budget 2022-23 has nothing special. The government will issue new passports with microchip to ease travel.”

More time on taxes

While there is no change on the income tax slabs, the government has been lenient on one aspect. “Currently, taxpayers have until December 31 each year to revise the IT returns,” said Jitendra Gianchandani, Partner at the tax consultancy JCG. “The government has now allowed revision of tax returns of up to 2 years. At the same time, it may increase the chances of a tax defaulter purposely making drastic changes in their IT returns and which would defeat the good intentions of the scheme for genuine taxpayers. The IT should set up the guidelines to define what income to include under ‘forgot’.