Union Budget 2023: Chimney's Duty Up While Lab-Grown Diamond Duty Down

07 February 2023

On 02 February 2023, the Indian government announced the Union Budget of 2023. The announcement administered several important implementations and proposals in the country for the economic development of India, and to boost local manufacturing. The proposed budget announced the customs duties on imported goods, also known as tariffs, have received changes. The import duties on electric kitchen chimneys, lab-grown diamond seed, and imitated jewellery with other products received updates.

 

Electric Kitchen Chimney Duty Increased

The exemption from the custom duty on the electrical kitchen chimney was reduced. The electrical kitchen chimney was made expensive to import, as the import duty on the commodity increased from 7.5% to 15%.

 

The below-shown data represents the imports of electrical kitchen chimneys in India in the past 5 years with the respective growth value of each year. The data is shown on the basis of HSN classification i.e., Subheading 841460.

 

 

The import data for electrical kitchen chimney shows the growth value of each year, starting from 2017 to 2021. The growth value in 2017 registered a minor growth value of 9% as the value of 2016 amounted to $38.23 million and 2017 amounted to $41.51 million.

 

The growth in the imports for the commodity in India registered the highest surge in 2021 as it shows an 89% growth value. While due to the pandemic, the demand and production were both affected, showing a -7% of growth value.

 

Import duty increase will cause a decline in the imports of chimneys while boosting the manufacturing of kitchen appliances domestically through imports of raw materials. It implies that the kitchen ware industry might see a boost in the value as exports will increase with increase in the production units.

 

Seeds of Lab-Grown Diamonds Duty Reduced

The proposal on the reduction of the customs duty of imported seeds to sown lab-grown diamonds has come across as a big decision by the Indian government. Extracting natural diamonds is an expensive and extensive process that is becoming increasingly difficult.

 

The threat of deposit depletion in natural diamonds has caused a significantly higher rise in the cost of the extraction process. The industry of gems has found lab-grown diamonds to be a better alternative, as LGDs are grown inside a lab with the help of technology.

 

The proposed budget put a light on the significance of India in the diamond industry by stating that India is a global leader in cutting and polishing diamonds from natural resources, further adding that India contributes about three-fourths of the worldwide diamond turnover by value.

 

The lab-grown diamonds are made from seeds made of the same carbon as natural diamonds. Reduced customs duty on the imports of these seeds will allow India to grow more diamonds domestically and boost the demand among consumers—both locally and globally.

 

Due to the shift in the diamond industry from utilizing natural resources to using seeds, the demand for LGDs will increase, causing the prices to go higher. Industry experts claim that it will be a beneficial move for India and the diamond industry, pushing synthetic diamonds exports up.

 

Below represented data features the yearly values of diamonds imported by India in the past 5 years, along with each year’s growth value. The HSN Code used for the representation of each commodity in the following dataset is—7102 for Diamonds and 7104 for Precious Stones.

 

 

The import data above shows that the demand of diamonds went down slightly in 2018 as growth value went down by 2%. The growth value went on to decline till 2020, recording the highest negative growth (28% in 2020), followed by the highest growth in 2021 (65%).

 

The growth value of precious stones shows much higher values than diamonds. Followed by a growth value of 82% in 2017, 2018 registered a downfall of 16%. In the years after 2018, precious stones didn’t register a negative growth and had the highest growth in 2021 (121%).

 

Changes In Custom Duty Of Jewellery Imports

The other line of commodities related to jewellery that have received changes in their customs duty are gold, silver, platinum and imitation jewellery. While the duty on the seeds for lab-grown diamonds was reduced per the proposal, the duty on mentioned commodities has increased.

 

The budget also brought the proposal to increase the customs duties on the imports of articles made from gold and platinum. The import duty on silver dore, bars, and articles was also increased. This change will bring the imports down of silver, gold, platinum, and their articles.

 

The official figures on the changes in the customs duties are yet to be published by the Government of India. Still, according to online sources, there has been an increase in the import duties on articles made of precious metals.

 

Customs duty on gold bars increased from 20% to 25%, and duty on silver bars increased to 5% from 2.5%. The import data represented below features the yearly values with a growth chart of the imported gold and silver in the past five years for HSN Codes – 7106 (Silver), and 7108 (Gold).

 

 

The growth of silver imports in 2017 and 2018, as compared to the values of gold, registered significant positive growth, despite the high difference between the market value between both.

It is to be noted that the trends in the import values give a crucial indication of the demand.

 

In 2018, silver registered the highest import value of $3.86 billion. The imports of gold were registered as the highest in 2021 for an amount of $55.78 billion. However, both of the precious metals registered the highest growth in 2021 (76% for silver and 154% for gold).

 

As per online sources, the duty on the importation of imitation jewellery also increased, reaching from 22% to 25%. The below-represented data shows the imports of the commodities by India in the past five years for the HSN Code – 7117 (Imitation Jewellery).

 

The growth value of the imitation jewellery imports in the past five years shows vigorous fluctuation. In 2017, the imports registered a growth of 34%, followed by minor variations in the growth of 3% in 2018 and 1% in 2019. 2020 registered a sudden negative growth which is also the highest in the past five years, followed by the highest positive growth of 39% in 2021.

 

The increase in the customs duties for the importation of all the aforementioned commodities will cause a decrease in imports and an increase in domestic production. This will boost the industry’s manufacturing units and an eventual domestic demand for the commodities.

 

The announcement of the proposals for changes in customs duties will increase the Indian economy by allowing domestic manufacturers to make products domestically, and chances of bolstering exports and increased trade relationships with other countries in the future.