Jewellers squeezed over advance tax payments, sparse consumer interest

High volatility in have delivered a double-whammy to jewellers, with consumers staying away amid the coronavirus spread and reduced discretionary spending. While jewellery sales have virtually come to a standstill, the advance tax payments they have made has also put them under pressure. Prices continued to fall today even as the inauspicious period is expected to last for the next 10 days. Demand is likely to improve only next month.

have begun reducing inventories to avoid additional cost of handling. As against the level of 35-45 days of stocks held earlier, they are building stocks for only 7–10 days to protect themselves from price volatility.

usually pay a lump sum as advance tax on presumption of sales during the January–March quarter and compensatory tax, if any, from the previous three quarters of the current fiscal. This year, however, the tax component is expected to rise significantly due to a sharp spike in The Income Tax Department has begun asking to pay advance tax on the increased value of stock following the sudden spike in That deadline has now ended but has had its impact.

“It is a double-whammy for jewellers as sales have come to standstill due to the fear of coronavirus pandemic and high volatility in gold prices. The decline in sales has created a liquidity problem for jewellers. At the same time, they will have to pay advance tax on increased value of stocks,” said Anantha Padmanabhan, Managing Director, NIC Jewellers, a Chennai-based jewellery retailer and chairman of Gems and Jewellery Domestic Council (GJC).

Though they have moderated a bit, gold prices have risen by a significant 25 per cent since September to trade currently at Rs 41,000 per 10g, a decline of Rs 1,500 from the previous day’s close. Standard gold in Mumbai’s Zaveri Bazaar corrected after hitting a record high of about Rs 44,000 per 10g. Silver also shed Rs 1,500 on Saturday on global cues to trade at around Rs 42,600 per kg.

“We are sitting idle as the streets in Zaveri Bazaar which usually transact business in bullion, jewellery and precious stones worth about Rs 450 crore every day, stand deserted due to the coronavirus scare. With banks are gradually going bankrupt, jewellers may have to go that way,” said Kumar Jain, Director, Umedmal Tilokchand Zaveri, a bullion dealer and jewellery retailer in Zaveri Bazaar.

Coronavirus, which originated in China, has spread to over 100 countries, claiming over 4,400 lives across the world.

Surendra Mahta, National Secretary of India Bullion and Jewellers Association (IBJA), said, “The advance tax for any corporate house is calculated based on its estimated sales. Jewelers are require to pay tax either on the value of stock at the time of purchase or the market rates whichever is lower, so they needn’t worry.”