Industry players are lobbying for lower import duties on gold and other precious metals in India after the government announced last week that it had raised tariffs to 12.5 percent. 

The government’s decision could be detrimental to Indian exporters who stand to lose business to neighbouring countries, the Gem & Jewellery Export Promotion Council (GJEPC) warned. 

The council added that it had initially sought reduction in import duties on gold and other precious metals to 4 percent from 10 percent, and to 2.5 percent from 7.5 percent for cut and polished gemstones. Taxes on polished gems remain unchanged.

Pramod Kumar Agrawal, chairman of GJEPC, said, “The industry is going through tough times with a decline in exports as well as job losses, and we expected a positive announcement to encourage the sector.” 

Hiking gold import duties and keeping tariffs on polished gems at present levels will instead stifle the retail business and lessen India’s competitiveness as a diamond polishing and cutting hub. 

“GJEPC will continue to work with the government to get favourable relief in terms of duties and ease of doing business,” added Agrawal.

Somasundaram PR, managing director of WGC India, said in a statement that the import duty hike will negatively impact India’s gold industry. 

“This will impede efforts to make gold as an asset class particularly when gold prices are already rising globally. In addition, the grey market will thrive which will dilute efforts to reduce cash transactions,” revealed the WGC official. 

He added that millions of Indians invest in gold as part of their household savings, not simply as discretionary spending for consumption. People buy gold as a long-term investment to protect their wealth and gold also has huge significance socially, emotionally and economically in India. 

“We believe that gold can play a positive role in the Indian economy, but to enable this, there needs to be a reduction in overall taxes, a stable policy environment and a transparent trading market,” he continued.