National News
Trump’s reciprocal tariffs spark job loss fears in GJ sector
The U.S. government’s move to impose reciprocal tariffs has sent ripples of concern through India’s gem and jewellery sector, a vital component of the nation’s economy. Here’s a breakdown of the key issues and implications:
The Core Issue: Reciprocal Tariffs and Trade Imbalance
Unequal Tariff Structures: The heart of the issue lies in the perceived imbalance in tariff structures between the U.S. and India. India currently levies a 20% tariff on gold jewellery imported from the U.S., while the U.S. applies a significantly lower duty of 5.5-7% on Indian gold jewellery. Similarly, India imposes a 5% tariff on cut and polished diamonds, whereas the U.S. has historically maintained zero tariffs on these Indian exports. This discrepancy has prompted the U.S. to consider reciprocal tariffs, aiming to create a more level playing field.
Potential Impact on Exports: The U.S. is a critical market for Indian gem and jewellery exports. Any increase in U.S. tariffs would directly raise the cost of Indian products for American consumers, potentially reducing demand and negatively impacting export volumes.
Key Export Categories at Risk: The primary export categories facing potential disruptions include:
• Cut and polished diamonds: A major export segment, historically enjoying tariff-free access to the U.S. market.
• Studded gold jewellery: A significant contributor to export revenue.
• Plain gold jewellery: Another essential export commodity.
• Lab-grown diamonds: A growing sector within the Indian gem and jewellery industry.
Economic and Social Implications for India
• Impact on Export Revenue: A decline in gem and jewellery exports would directly affect India’s foreign exchange earnings.
• Employment Concerns: The industry is a significant employer, providing livelihoods to over two million people, with a substantial portion being women and individuals from economically disadvantaged backgrounds. Tariff-induced disruptions could lead to job losses and economic hardship for these vulnerable populations.
• Industry Vulnerability: While not the single largest export driver, the gem and jewellery sector holds a vital position in India’s economy. Its labor intensive nature, and the high value of its exports makes it very important.
• Trade Relations: The tariff issue has the potential to strain trade relations between India and the U.S., potentially impacting other areas of economic cooperation.
Factors to Consider
• Market Dynamics: The extent of the impact will depend on the magnitude of the tariff hikes and the ability of Indian exporters to absorb the increased costs or find alternative markets.
• Negotiations: The outcome will also depend on the results of ongoing or future trade negotiations between the two countries.
• Lab-grown Diamonds: The lab-grown diamond market is fairly new, and very dynamic. Any tariff changes could drastically alter the market share of Indian companies in the United States.
In essence, the potential imposition of reciprocal tariffs by the U.S. poses a significant challenge to India’s gem and jewellery industry, with potential ramifications for export revenue, employment, and overall economic stability.
National News
Jewellery Manufacturers Seek Tax Relief As Rising Gold Prices Inflate Inventory Valuations
Higher Gold Prices Sustained Turnover Value, But Jewellery Volumes Declined As Consumers Adjusted To Costlier Purchases.
Jewellery manufacturers in Coimbatore have submitted a representation to the Government of India seeking a review of the existing methodology for valuation of gold inventory for income tax purposes, citing significant financial pressures arising from the sharp increase in gold prices.
According to industry representatives, the closing stock value of gold held by jewellery manufacturers and retailers is currently determined on the basis of the weighted average cost of inventory available at the end of the financial year. The sector has highlighted that gold prices witnessed an increase of approximately 65 per cent between March 2025 and March 2026, resulting in a substantial rise in the book value of inventory.
Industry stakeholders have stated that while the monetary value of sales turnover may have remained comparable to the previous year due to higher gold prices, the actual quantity of jewellery sold has declined as consumers adjust to elevated price levels. Consequently, manufacturers contend that the appreciation in inventory value is being reflected in taxable income despite the absence of corresponding realised sales and cash flows.
The industry has further represented that maintaining adequate gold inventory is essential for meeting consumer demand for a wide range of designs and product categories. As a result, manufacturers are unable to significantly reduce stock holdings without affecting business operations and market competitiveness.
Particular concern has been expressed by micro and small-scale jewellery manufacturers, who report increased working capital requirements and liquidity constraints arising from taxation linked to inventory appreciation. Industry associations have requested that the Government examine alternative valuation or taxation mechanisms that more accurately reflect realised business income and cash generation.
The representation seeks consideration of suitable policy measures to address the financial impact of inventory value appreciation on jewellery manufacturers while ensuring continued compliance with taxation requirements and supporting the sustainability of the sector. Hence, the government should take separate statement of the gold stock with the manufacturers every year. It should collect advance tax based on the sales.
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