Fears about the implementation of GST saw gem and jewellery exporters importing as much rough diamonds as possible before July. This led to imports moving up by over 50 per cent in volume terms between April and June, while exports of cut and polished diamonds were marginally down in rupee terms.
Contrary to the sector’s efforts towards increasing value addition, exports of gold medallions and coins stood higher than that of gold jewellery in June.
As per the data from Gem and Jewellery Export Promotion Cou?ncil (GJEPC), import of rough diamonds was up 53 per cent to 58.5 million carats between April and June. In rupee terms, it was 13 per cent up to Rs 34,768 crore against April-June last year and in the dollars it went up 17 per cent.
But exports were largely flat. In rupee terms, cut and polished diamond exports was 0.56 per cent down and in dollar terms it was marginally up by 3 per cent.
“As far as the demand is concerned, it is quiet period and hence the exports have been flat. But exporters were worried about GST and its implementation. So they bought rough diamonds in large quantities,” said Sabyasachi Ray, executive director, GJEPC.
Earlier, exports were out of the purview of excise duty and the value-added tax (VAT). Now even exporters have to pay GST and wait for refunds. The government has said refund will be available in seven days from the date of filing of returns. For a consignment exported on July 1, exporters will be filing returns by August 20 and they will get the refund as per the government’s promise on August 27. So, the tax amount will be stuck for at least 56 days.
“In case of rough diamonds, it will take at least 8 months as the processing of the stones will take around six months. The working capital will be locked up for these months,” said Ray.
Further, exports of gold medallion and coins were larger than gold jewellery in June. Historically, medallion and coin exports are smaller than jewellery.
The country exported Rs 3,278 crore gold medallions and coins in June against Rs 2,814 crore gold jewellery. In the same month last year, exports of medallions and coins stood at Rs 2,671 crore and jewellery Rs 4,824 crore.
Export of medallions and coins has been significantly growing in the past few months. But even in May it was lesser than gold jewellery. Last month, the country shipped Rs 3,436 crore jewellery and Rs 2,933 crore medallions and coins.
As reported by Financial Chronicle earlier, the industry finds that this could be mainly because of the crackdown on exports of 24-carat jewellery. Largely, 24-carat gold is used in the manufacturing of coins, bars and medallions and not jewellery as 24-carat is more malleable and cannot be worn.
“Some of export houses have been importing gold bars, coins and medallions and with negligible value-addition, re-exporting them as jewellery. This round-tripping helps them increase their export turnover,” said industry sources.
The higher turnover helps them retain the export-house status and receive bank credit at lower rates. Further, premier trading house status helps them import gold directly.
After these jewellery exports came under the government scanner, shipment of medallion and coins has gone up. Industry insiders assume that some of these export houses would be re-exporting the gold as coins and medallions without passing them off as jewellery, fearing scrutiny.