AKGSMA SUBMITS A PRE-BUDGET MEMORANDUM – 2023 TO HONOURABLE UNION FINANCE MINISTER OF INDIA, SMT. NIRMALA SITHARAMAN

5th November 2022

This Memorandum contains the various proposals for the Consideration of the Ministry of Finance, India while preparing the Budget and tax proposals for the financial year 2023-2024 by the Government of India.

Below you can read the submitted Pre-Budget Memorandum – 2023 to Honourable Union Finance Minister of India, Smt. Nirmala Sitharaman by AKGSMA

To

Smt. Nirmala Sitharaman

Finance Minister of India

Respected Madam,

The All Kerala Gold & Silver Merchants Association considers it an honour to submit a Pre-Budget Memorandum – 2023 to Honourable Union Finance Minister of India, Smt. Nirmala Sitharaman. This Memorandum contains the various proposals for the Consideration of the Ministry of Finance, India while preparing the Budget and tax proposals for the financial year 2023-2024 by the Government of India.

All Kerala Gold and Silver Merchants Association (AKGSMA) is the largest trade body of the gold and silver traders and manufacturers in Kerala. Having over 7000 members, we represent the jewellery industry which remains one of the largest contributors to GDP of the State of Kerala.

Madam, it is with this objective, that we wish to present before you certain facts and proposals which are essential in ensuring the continued welfare and prosperity of the Gem & Jewellery Industry which contributes about 7% to the country’s total GDP and employs more than 50,00,000 workers.

Removal of restrictions on import and exports of gold: As you are aware Imported Gold into India Currently requires duty and tax payment of 18.45%. Apparently, these measures were for minimizing Current Account Deficit (CAD), this has only fuelled Smuggling, Hawala Transactions and creation of Parallel economy. ​This situation Significantly erodes the competence of organized players both domestically and internationally, thereby limiting the growth prospects of the industry.​ As GST Implementation has positively impacted the legalization of Jewellery Industry the major remaining hurdle remains the exorbitant duty Structure in Imports.​

Therefore, we humbly recommend your good office to take steps to get domestic prices on level with international prices to bring about an efficient two-way transfer of the commodity.​For this to become successful, additional taxes, duties and levies need to be abolished. The Government should also ​encourage Tax breaks for Payment for gold in Indian Currency offsetting dependence on dollar reserves for Gold Import​. This should facilitate a gradual move towards a free market, which allows imports and exports of gold to be made freely or with minimal restrictions. ​

We are sure with this measure; India will become the Global price setter and Industry leader and will add billions in economic activity​. We are sure the Smuggling and Tax haven appeal of gold will cease to exist thereby bringing the entire household reserves into open economy.​

Development of gold-related financial instruments: Traditionally, Gold has been used as money and also served as a relative standard for currency equivalents specific to economic regions or countries, until recent times. India continues to remain world’s second biggest consumer of Gold; A very significant portion goes to augment the household reserves of the Indian families. Considering the strong track record of gold as a hedge against inflation, this may not be a negative thing for the economy. Recently the Government of India has promoted Gold Exchange traded funds and Sovereign Gold bonds as an alternative to physical stocking of gold. This however discounts, the innate urge of the families to buy ornaments and the primacy of ornaments in all social functions in the country. Therefore, we recommend the following:

1. 1. That organised jewellers should be encouraged to participate in bringing out the household reserves of gold into open market by regularising the rules for depositing of Old and Used gold with them in exchange for purchase of new jewellery.
   2. The Organised Jewellers may also be encouraged to offer financial incentives for such deposit if made in advance for future purchase. As this will ease the cost of working capital for jewellers, The jewellers will be able to offer more return than the current returns on Exchange traded funds and Sovereign Gold Bonds. The Jewellers significantly benefit as they get their raw material at a cheaper cost than the imported raw materials currently available. The economy too benefits due to the lower dependency on Imports.

Development of markets for physical and financial bullion: Madam, we are aware of a number of initiatives by your government for development of Physical and financial bullion markets thereby make our country the price setter of the commodity in the world. Also, it must be noted that significant gold deposits are being developed in many African countries. However, the gold is being routed to Indian market through refining arrangements in other countries like UAE. We need several regulatory initiatives to create an ecosystem in India that can purchase this gold ores and bring to India and use after refining here. We request for the following initiatives to facilitate this in coming budget.

1. 1. Exemption in Import duty of gold Dore bar which will be used for manufacture of Reexported Ornaments.
   2. Budget assistance and Single Window Clearance for Precious Metal Refining parks across the Country, at least one in each major state related to Gem and Jewellery Industry.
   3. Facilitation of creation of a financial framework for payments of the Import cost of gold Dore bar from African Countries through Unified Payment Interface (UPI) from NPCI.
   4. Introduction of a facility like a Bullion Bank where the public can deposit and withdraw gold like cash and fetch interest on their deposits. Deposited gold can be utilised to provide Gold Metal Loans to domestic Jewellers.

Ease of Compliance for MSMEs & Support for MSME Units in Gem & Jewellery: Madam, as per the estimates of Gem and Jewellery Export Promotion Council (GJEPC), 80% of the Organised jewellery Exporters in India belongs to the MSME sector. In this connection the enhancement of turnover criteria for MSME sector has been a welcome step from the government. In continuation of the same we request for additional benefits to MSME sector in Gem and Jewellery Industry as follows.

1. 1. The Limit for Mandatory E-Way bill for transfer of Gem & Jewellery should be fixed at Rs.10 Lakhs (Approx 200gms) thereby absolving the SME Jewellers from the Cumbersome process
   2. The requirement of Mandatory E-Way bill to transfer within 25 Kms of the business premises should be exempted as the Jewellers travel with their goods for hallmarking, dye work, transfer between Job workers etc which does not constitute supply in itself. (There is no scope for GST evasion as the proper recording of other movement of transfers will disincentivise the GST Invasion for small jewellers because of breaking of the GST loop)
   3. Withdrawal of Gem & Jewellery from the goods specified in Notification 59/2022 which gives extraordinary powers to Customs authorities to undertake controlled delivery of consignments.
   4. Removal of Mandatory hallmarking requirements for micro jewellery firms with turnover up to 5 Crores.
   5. TDS Compliances relaxation may be given for business in SME sector for 3 years from formation
   6. Labour Compliances relaxation may be given for business in SME for 3 years from formation.

Support for Jewellery Industrial Park: Madam, many of the recent regulatory changes have exclusively been to the benefit of big Corporate Jewellers, and it is important that the small Jewellers remain relevant and solvent in the economy as they provide employment and means of living to a significant number of the labour force. As such we find that an Integrated Industrial Park for Gem & Jewellery sector in the state of Kerala, a major production hub in India can be a significant initiative. This project with immense benefits and long-term prospects especially in public revenues (through taxes and fees) and employment generation (direct and ancillary) requires great amount of support from the Government, especially in terms of acquisition of suitable land and fast tracking of required approvals. We therefore humbly request that an allocation may be provided in the Union Budget for acquisition of appropriate land in Kerala for this purpose. Our association can work with Government in ensuring the success of this project as we with a membership of more than 7000 jewellers represent the small and medium Jewellers who can create great economic benefit through the implementation of such a park. Trichur, known as the Gold city of Kerala, will be an appropriate location for this.

Ease of Compliance of GST: Madam,

1. 1. Currently in case of job work of Ornaments, the Principal Manufacturers are required to file GST ITC-04 on half-yearly or annual basis. This is a cumbersome process for medium, small and micro jewellers. This compliance may be completely removed as there is no significance for tax collection.
   2. GST has already completed 5 years on 1^st July 2022. The response from our sector has been excellent with buoyant tax collections. However, in this period number of procedural lapses may have occurred due to the lack of awareness of various provisions. It is humbly requested a one-time amnesty scheme may be introduced in the Union budget to remove the hardships caused to taxpayers where no material tax payment short fall is deducted.
   3. GST section 129 currently penalises genuine taxpayers even for minor procedural lapses. The Section may be amended to levy penalty only in cases where intention to evade taxes is established.

The Gem & Jewellery Industry went through several hardships in the pandemic period. However, the world now stands at the edge of a global economic boom in gems and jewellery, and India is poised to sit at the centre of it.  We look forward to you Madam, to open a path towards the prosperity and economic well-being of the Jewellery Industry by initiating far reaching steps requested by us in the Coming Union Budget Proposals for Financial Year 2023-2024.

Thanking you,

Yours sincerely

B.Govindan, President

1. Surendran, General Secretary
2. Abdul Nazar, Treasurer

All Kerala Gold & Silver Merchants Association.