Mumbai, July 15: The implementation of the India-United Kingdom Free Trade Agreement (FTA) is expected to significantly enhance the export of gems and jewelry, according to Prithviraj Kothari, President of the India Bullion and Jewelers Association (IBJA). He stated that the agreement will reduce the tax burden on jewelry, diamond-studded products, lab-grown diamonds, polished diamonds, and other precious stone items.
In a conversation with a news agency, Kothari emphasized that the FTA will provide a substantial boost to India’s gem and jewelry exports due to lower tariffs and improved market access for a wide range of products.
“Our jewelry exports will see a massive increase—jewelry, diamond jewelry, lab-grown diamond jewelry, diamonds, and polished diamonds will now be exported to the UK. Previously, tax rates were quite high. Now, the items most in demand there will become more affordable,” he explained.
He further noted, “When you establish relations with any country, it undoubtedly becomes a two-way trade. This partnership with the UK is a significant achievement for us. As you have seen, similar agreements are being signed with Australia and France; free trade agreements (FTAs) are flourishing everywhere. Therefore, the Indian market is now thriving.”
Kothari also mentioned that there has been a substantial shift in the business environment in the country since 2014. He pointed out that while the introduction of GST faced opposition, its collection has been steadily increasing, indicating its success.
He highlighted that the new generation is rapidly adopting new technologies and modern systems. The government is continually making new initiatives to understand industry needs and facilitate business operations. According to him, the industry has witnessed changes in recent years that were not possible for decades.
Additionally, Adil Kotwal, President of the Gems and Jewelry Manufacturers Association, echoed similar sentiments, stating that all SEEPZ (Santacruz Electronic Export Processing Zone) exam managers and other officials are present. This partnership between India and the UK represents a crucial opportunity, described as a comprehensive economic and trade agreement.
Kotwal informed that “99 percent of products will now be duty-free.”
Meanwhile, Ketan Kothari, Director of Augmont Enterprises Limited, discussed a historic Memorandum of Understanding (MoU) signed with the National Stock Exchange (NSE) regarding Electronic Gold Receipts (EGR). He stated, “Today, we signed a strategic tie-up with the NSE, focusing on providing liquidity, price determination, gold creation, redemption, and physical delivery for retail and B2B customers.”
He added, “EGR will transform the way gold is bought, held, or traded in India, as it is a regulated product. You can hold as little as 10 mg of gold and redeem it for a minimum of 1 gram of gold. The price determination process will be competitive, ensuring the best rates.”
Ketan Kothari further explained that EGR could significantly modernize and organize the gold trade in India. He noted that through the EGR system, individuals with gold coins and bars that have been idle for years could generate a new source of income. This would not only provide investors with an opportunity to earn interest but could also reduce the country’s gold imports.
He clarified that customers holding gold jewelry will not need to convert their jewelry into EGR. This system is primarily for those with gold coins or bars as investments. Such investors can convert their gold into EGR units through Augmont’s network of jewelers and touchpoints, receiving EGR units in return.
Ketan Kothari explained that these EGR units could later be lent to jewelry manufacturers through a Securities Lending and Borrowing (SLB) platform, providing interest to investors. He compared this to bank fixed deposits, where individuals deposit money and earn interest, suggesting that similar returns could be achieved through EGR.
He noted that this arrangement would also benefit jewelry manufacturers by providing them with gold available as EGR instead of importing new gold, thus mitigating the risks associated with fluctuations in gold prices. Manufacturers will create jewelry using physical gold obtained through EGR and can later return the same form of gold, benefiting the entire ecosystem and potentially reducing the country’s dependence on gold imports.
Addressing questions related to GST, Ketan Kothari stated that EGR is a new product that converts a physical asset (gold) into a financial security for the first time. He explained that when physical gold is deposited with a vault manager and converted into EGR, clarity regarding input tax credit is needed. However, he noted that a solution to this issue is nearly ready, and work is underway with the NSE in this regard.
He further stated that once EGR is created and traded on the stock exchange, GST will not apply to its buying and selling, as EGR will be considered a security. GST will only be applicable when investors redeem EGR for actual gold delivery. According to him, this system is entirely logical and transparent.
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