- Shops shut in Mumbai's Zaveri Bazaar, country's top market
- Industry says it's suffering from weak demand after price rise
Jewelry shops across India, the world’s biggest market after China, will shutter for three days starting Wednesday in a bid to reverse plans by Prime Minister Narendra Modi to impose a 1 percent excise duty, according to the All India Gems & Jewellery Trade Federation.
The government should withdraw the levy announced in Monday’s budget because the industry is suffering from weak demand and high import taxes, Bachhraj Bamalwa, director at the federation, said by phone from Kolkata. The group represents 300,000 jewelers and bullion dealers in the nation. The India Bullion and Jewellers Association Ltd. said earlier it was shuttering outlets at Mumbai’s Zaveri Bazaar, the country’s largest market, until further notice.
The new duty comes at a time when the industry is facing a slowdown in purchases because of the surge in prices since the start of the year and after a poor monsoon cut harvests and incomes in rural India, a traditional source of demand. A three-week nationwide strike in 2012 was successful in getting Modi’s predecessor, Manmohan Singh, to drop plans for an excise tax, although the government subsequently introduced a 10 percent import duty.
“It will be a headache for the small jewelers, which make up 80 percent of the industry, and they will have another department to report to from a compliance point of view,” G.V. Sreedhar, chairman of the trade federation, said by phone from Bengaluru in south India, on Tuesday. “This will hurt their operational ability and this will flow down to the retail level as well.”
The planned excise tax will make purchases more expensive for buyers and lead to irregular business practices, P.R. Somasundaram, managing director for India at the World Gold Council, said Monday after Finance Minister Arun Jaitley announced the move. The planned levy will put a significant compliance burden on the industry, which has been weighed down by the import duty and a value-added tax, he said.
India’s net imports of bullion were 897.5 metric tons in 2015 and consumption was 848.9 tons, according to data from the World Gold Council.