BENGALURU: Over 20% of loans given to the Indian gem and jewellery industry have become non-performing assets (NPAs), resulting in the industry gaining just 2.7% of the country’s total credit issuance.
A recent report by the World Gold Council on ‘Jewellery market structure’ points out various challenges faced by the retail gold jewellery market including financing as it has become challenging for smaller independent jewellers who tend to rely on the monthly gold scheme for funding or act as money lenders.
Since the industry is highly fragmented, according to estimates of various trade bodies, the number of jewellers in India range between 5-6 lakh. The report said many have been unable to keep pace with the recent introduction of transparency measures and regulations and as a result their businesses have failed. The gold industry contributes 1.3% to Indian GDP. As mandatory hallmarking became effective from June last year, its introduction is creating a level playing field in terms of purity, WGC said.
It pointed out that national and regional chain stores will continue to gain market share in coming years as they are able to carry large inventory. According to market intelligence from Metals Focus, by 2021 chain stores (both national and regional) had achieved a 35% market share. Ashish Pethe, Chairman, Gems and Jewellery Council (GJC) India says GST has negatively impacted retail gold bar and coin purchases. Under the GST regime, a consumer pays 3% at the time of buying a bar or coin and then pays a further 3% GST on jewellery using that bullion.
Pethe said, “With no offset of GST for the consumer when exchanging their bullion for jewellery, the consumer effectively pays double the tax. Another anomaly within the GST framework is that when an individual provides bullion for job work, he has to pay 18% GST on the making charges , while a registered dealer carrying out the same transaction has to pay just 5% GST.” He added that this issue must be addressed to bring the consumer on par in terms of taxation.