All India Gem and Jewellery Domestic Council (GJC) July 1 said it is planning to meet the Indian Banks Association (IBA) after Budget 2019, to find a solution over the liquidity crunch the industry is facing following lenders refusal to extend loans.
“Currently we had discussions with the finance minister and after the Budget, we are planning to meet IBA to find out solutions for the liquidity crunch the industry is facing. The current capital cash credit has been reduced by 20-30 per cent on the existing loans and new loans are refused. The industry is facing cash crunch since February last year,” GJC Vice Chairman Shankar Sen told reporters here.
Following this, the stock level has gone down affecting sales, expansion plans and job creation, he added.
GJC, he said, wants the bankers not to treat the gems and jewellery companies as a sector but take up the loan applications on case to case basis.
Meanwhile, the industry has urged the government to give exemptions to households for minimum 500 grams of gold deposited under Gold Monetisation Scheme (GMS), GJC Chairman Anantha Padmanaban said.
“Under the Income Tax Act, married women of a family are allowed 500 grams of gold, the men 150 grams and to be married daughter 150-200 grams. We don’t want any amnesty from the government in this regard. We want the government to mention this in GMS to make the scheme more effective with increased participation and to reduce any apprehension of being questioned by the tax department,” he said.
This will help unlock family gold reserves of up to 24,000 tonne and help reduce the current account deficit (CAD), he added.
Further, GJC has also urged the government for exemption from Capital Gain as per Section 54F of the Income Tax Act 1961, extended to the gems and jewellery industry.
“This will help the industry to move towards organised and compliant business practices. In case of remaking of new jewellery from old jewellery or old gold, GST is applicable at 18 per cent on labour charges. Due to the high rate of GST, the customers are reluctant to go for this option,” the GJC budget recommendation to the finance ministry said.
The other option left with the customer is to sell the old jewellery and buy new jewellery, however, as there is capital gains tax involved, customers are hesitant for this option also, it added.
GJC also urged that the limit of Rs 10,000 per day be increased to Rs 1,00,000 per day on revenue expenditure.
Most of the people in rural India prefer gold as an investment or savings and in case of medical or financial emergencies they liquidate it through local jewellers, however, due to provisions contained in Section 40A of the Income tax Act, a jeweller is unable to make a payment above Rs 10,000 in cash, it added.