Higher customs duties are likely to hit the jewellery industry. The hike would provide a level playing field for local manufacturers who are hit by cheap imports from China, say officials and industry sources.

Finance Minister Nirmala Sitharaman could make the announcement when she presents her annual budget for 2020/21 on Feb. 1, along with other stimulus measures to revive sagging economic growth, one of the government officials said. Higher customs duties are likely to hit goods such as mobile phone chargers, industrial chemicals, lamps, wooden furniture, candles, jewellery and handicraft items, two government sources with direct knowledge of the matter said.

In the interim budget that was announced last year, import duty on gems and jewellery was increased to 12.5 per cent from 10 per cent. This was a major set back for the industry. After constant talks with the Ministry of Commerce & Industry, the industry is expecting a decrease in import duty from the current 12.5 per cent to 4 per cent.

The current import duty is causing a lot of impediments for the gems and jewellery industry leading to a constant decrease in export figures. High import duty has resulted in undue blockage of huge working capital of small and medium jewellery exporters. Duty hike is indirectly creating a disincentive to the organized players in the industry. Huge influx of metals through unofficial channel has also been reported. Bank Guarantee to the tune of more than 100% of basic customs duty on metals is submitted as bank guarantee in case of procurement of duty-free metals from nominated agencies/banks.