Whalesbook
THE SEAMLESS LINK
These reform proposals represent a strategic pivot by the Indian gems and jewellery industry to navigate a complex global economic environment. The sector faces considerable pressure from fluctuating international demand and evolving trade policies, making domestic fiscal and regulatory adjustments critical for sustaining growth and market share.
The Global Headwind and Industry Response
Representatives from India's gems and jewellery sector are pressing the government for substantial policy interventions in the upcoming Union Budget 2026-2027. Industry bodies have outlined a series of demands aimed at bolstering cost efficiency and improving international market standing amidst evolving global trade dynamics. The Gem and Jewellery Export Promotion Council (GJEPC) submitted a pre-Budget memorandum highlighting critical areas for reform. GJEPC chairman Kirit Bhansali stated that the global gem and jewellery trade is undergoing significant shifts, citing high U.S. tariffs and changing supply chains. To maintain India's competitive edge, the council is advocating for a rationalisation of import duties on cut and polished diamonds and coloured gemstones. They also seek amendments to the Customs Act, 1962, to integrate modern practices such as risk-based clearance, AI-enabled digital appraisals, and self-certification for trusted exporters. These measures are intended to enhance efficiency, transparency, and reduce turnaround times for the export-oriented sector.
Fiscal Arithmetic and Competitive Positioning
Separately, the All India Gem and Jewellery Domestic Council (GJC) has focused its representation on domestic fiscal measures. GJC chairman Rajesh Rokde proposed reducing the Goods and Services Tax (GST) on gold and silver jewellery from the current 3% to 1.25%. This reduction, Rokde argues, will restore proportionality, alleviate financial stress for consumers, and broaden the tax base. The council also called for exempting capital gains tax on exchanges of hallmarked jewellery, provided the proceeds are immediately reinvested in new purchases, promoting continuity in asset holding. A significant demand from GJC centres on operationalizing the Tourist GST Refund scheme. The council urges the government to notify the necessary rules and establish digital claim and verification systems at major international airports. A phased pilot at Delhi, Mumbai, and Bengaluru airports is suggested, citing high jewellery sales and foreign tourist arrivals. Rokde pointed out that foreign tourists, particularly from the Middle East, Europe, and the United States, face a price disadvantage in India compared to competitors like the UAE and Singapore due to the lack of efficient GST refund mechanisms. This disparity results in lost retail demand for India, despite its strong craftsmanship. Without such schemes, India forfeits revenue that could otherwise bolster domestic sales and exports, a challenge exacerbated by efficient VAT/GST refund systems in rival nations.
Modernizing Trade Practices
The GJEPC's call for amendments to the Customs Act, 1962, signals a need to align India's trade facilitation with global standards. Current procedures are perceived as lagging, hindering the agility required by an export-focused sector. Implementing risk-based customs clearance and AI-enabled digital appraisals aims to expedite the movement of goods, reduce bureaucratic hurdles, and enhance transparency. For trusted exporters, self-certification could further streamline processes, reducing turnaround times and operational costs. This modernization is seen as crucial for India to fully leverage its manufacturing capabilities and global supply chain integration.
Sector Health and Outlook
The Indian gems and jewellery industry, a significant contributor to the nation's economy and exports, faces pressures from global economic slowdowns and volatile commodity prices. Major players like Titan Company Ltd, with a market capitalization often exceeding ₹2.5 trillion and a P/E ratio around 75, and Kalyan Jewellers India Ltd, with a market cap in the hundreds of billions and a P/E ratio typically between 40-50, are directly affected by consumer spending patterns and regulatory environments. Industry stakeholders believe that supportive reforms and a stable trade environment are paramount. If these budget proposals are enacted, they could significantly enhance the sector's cost efficiency, attract foreign investment, boost export competitiveness, and position India for sustained growth in the international jewellery market, effectively turning global challenges into opportunities.