Jewelers in India Extend Strike Seeking Withdrawal of Taxes
Gold jewelers in India, the world’s biggest bullion buyer, will extend the first nationwide strike in seven years for two more days to demand withdrawal of some levies, a trade group said.
The bullion industry is losing about 10 billion rupees ($199 million) in daily sales due to the strike that began on March 17, said Bachhraj Bamalwa, chairman of the All India Gems & Jewellery Trade Federation. The group wants a new excise duty of 1 percent on non-branded gold jewelry to be withdrawn.
“Smaller jewelers have the main problem and they are in a state of panic and in confusion,” Bamalwa said in a phone interview. “If they open their shops today, they don’t know how to go about with this levy.”
Jewelers are protesting against increased taxes announced by Finance Minister Pranab Mukherjee in his annual budget speech last week as the government seeks to rein in a widening current- account deficit, partly fueled by record bullion imports in 2011. Purchases may plunge 35 percent this year after the government also said it would raise the import tax on gold for a second time this year, raising retail prices by about 6.3 percent, according to the Bombay Bullion Association.
Mukherjee raised the import duty on gold bars and coins and platinum to 4 percent from 2 percent, after doubling the tax in January. A levy on gold ore, concentrate and so-called dore bars for refining will be doubled to 2 percent and an excise tax on refined gold will climb to 3 percent from 1.5 percent, he said.
“Gold imports are a huge burden on the balance of payments and accentuates the current account deficit,” the Associated Chambers of Commerce and Industry of India said in a statement. Bullion purchases by India could reach $100 billion by 2015-2016, it said. “The government should strictly monitor the inflows with higher customs duty,” it said.
Imports may drop to $38 billion in the year starting from April 1 from $58 billion this year, Chakravarthy Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, said in a report last month.
Rajesh Exports (RJEX) Ltd., India’s biggest exporter of gold jewelry, closed its 75 stores for a fourth day, losing 40 million rupees a day in sales, Chairman Rajesh Mehta said.
“We are solidly with the trade,” Mehta said in a phone interview today. “We have closed all our stores.”
Gold for immediate delivery fell 1.1 percent to $1,646.30 an ounce at 5:30 p.m. in Mumbai. Futures for April delivery on the on the Multi Commodity Exchange of India Ltd. fell 0.4 percent to 27,780 rupees per 10 grams ($552).
Members of the jewelers federation, which met Mukherjee last night, have been asked to submit a detailed petition to the government within the next two to three days, Bamalwa said.
The levy on non-branded jewelry won’t apply to small goldsmiths and artisans, the Central Board of Excise and Customs said in a statement today.
“From the jewelers point of view, the tax on them is not positive,” Kunal Shah, head of commodity research with Nirmal Bang Commodities Pvt. in Mumbai, said yesterday. “Their revenues are going to shrink because of the moves in the budget.”
Rajesh Exports fell for a seventh day in Mumbai trading today, the biggest losing streak since May 2011. The shares fell 1.2 percent to 124.05 rupees, the lowest level at close since Oct. 7. Gitanjali Gems Ltd. (GITG) fell for a third day, losing 0.6 percent to 369.75 rupees.
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