GJEPC backs gold duty hike in spirit, warns of MSME liquidity crunch

India’s gems and jewellery exporters have struck a cautious balance on the government’s sharp hike in gold import duty, backing the move in line with Prime Minister Narendra Modi’s call for economic self reliance while warning that the higher levy could squeeze MSMEs, lock up working capital and fuel smuggling.

The Gem & Jewellery Export Promotion Council (GJEPC) today said it has written to the Prime Minister after the government raised gold import duty to 10% from 5% and increased agri cess to 5% from 1%.

What are the council's suggestions

Following a meeting with major retailers and manufacturers, the industry body outlined a set of measures aimed at reducing India’s dependence on imported gold while protecting exports and domestic manufacturing.

Among the key proposals is a push towards lower caratage jewellery such as 14K and 9K products, which GJEPC estimates could reduce imports by 20-30%. The council also wants consumers to increasingly exchange old gold for new jewellery, revamp the Gold Monetisation Scheme to unlock India’s estimated 25,000 tonnes of idle household gold stock, and discourage investment in gold bars, billets and coins that account for 20-30% of total imports.

“As an industry, we remain committed to the spirit of ‘Nation First’ echoed by Honourable Prime Minister Shri Narendra Modi,” GJEPC said in its statement.

The council added that it is preparing a detailed paper for the government on reviving the Gold Monetisation Scheme.

At the same time, GJEPC reiterated its long held opposition to steep import duty increases, arguing that such measures have historically failed to materially curb demand.

“Despite gold prices doubling recently, imports have not declined proportionally,” the industry body said, adding that higher duties generally “fuel smuggling and escalate export costs”.

The biggest immediate pressure point for exporters is working capital. According to GJEPC, exporters are now required to furnish bank guarantees of ₹28-30 lakh per kilogram of duty free gold procured from nominated agencies, sharply increasing financial strain on manufacturers.

“The most severe impact of this policy will be felt by MSME manufacturers, who are the backbone of our industry,” the council said.

MSMEs account for 80% of GJEPC’s more than 10,900 members and many are already facing a liquidity crunch, it added.

The industry body also sought a special policy framework for jewellery exporters, arguing that the sector remains an important source of precious foreign exchange earnings at a time of broader economic challenges.

GJEPC urged the government to open discussions with the industry to find “sustainable solutions that align fiscal goals with export growth”.