Jewellers across the country have shut their shops till Monday, to protest against the increase in customs duty and introduction of excise duty for non-branded jewellery as proposed in the 2012-13 Union Budget. Due to the three-day “bandh”, the jewellery industry is expected to lose business worth Rs 5,000 crore.

Represented by the All India Gems & Jewellery Trade Federation (GJF) and the Bombay Bullion Association (BBA), among others, the industry is also seeking an appointment with finance minister Pranab Mukherjee for a detailed presentation on the impact of proposed duty increases.

“We are protesting against three basic issues — hikes in customs and excise duties, along with the provision of one per cent tax deduction by retailers for cash jewellery purchases of over Rs 200,000,” said Prithviraj Kothari, president of BBA.

The industry’s concerns assume significance, as the overall cost, including the proposed duty hike, for consumers to buy gold and diamond jewellery has gone up by seven-eight per cent in the last six months. The effective customs duty in September 2011 was hovering around half a per cent. Since no excise duty was levied around that time, the sudden tax burden is feared a huge loss of business due to waning consumer demand. Consumers may shift from “luxury buying” to “need-based purchase”. The loss in business may lead to a rise in overall jobless claims.

The finance minister doubled the basic customs duty (BCD) on standard gold and platinum bars to four per cent. The BCD on non-standard gold was also doubled to 10 per cent. The basic duty on gold ore, concentrate and dore bars for refining was also doubled to two per cent. A BCD of two per cent was levied on cut and polished coloured gemstones. An individual customer buying jewellery worth over Rs 2 lakh by cash payment would have to pay one per cent tax upfront. The jeweller would pay this to the government after collecting it from the customer. The one per cent tax will be applicable to traders or manufacturers purchasing gold jewellery worth more than Rs 2 lakh by cash payment.

The finance minister extended the excise duty net to unbranded jewellery, restricted till now to branded products. However, the one per cent duty on such unbranded jewellery would be charged on 30 per cent of the transaction value declared in the invoice. However, the minister exempted branded silver jewellery from excise duty. The excise duty on refined gold was hiked from 1.5 per cent to three per cent. Gold coins of purity 99.5 per cent and above, and silver coins of purity 99.9 per cent and above were also exempted from excise duty.

“While the customs duty increase is set to promote gold smuggling, the rise in excise duty would bring back inspector raj. The TDS collection would also increase paper work, which no industry would like to continue,” said Kothari.

Meanwhile, the overall sale of gold coins is set to increase, as the government waived three per cent of excise duty on coins of purity 99.5 and above. All coins currently sold in the country entail a purity of 99.5 per cent and more.

The excise duty on gold jewellery sold from export-oriented units into domestic tariff area was increased from five per cent to 10 per cent.

“This is impossible to accept,” said Ashok Minawala, ex-chairman of GJF.

Since the government fully exempted articles of goldsmith and silversmith wares of precious metals or of metals coated with precious metals not bearing a brand name from excise duty, the unbranded product sale would get a boost.

“We’ll meet the finance minister soon and seek a roll-back in excise and customs duty for the Indian jewellery industry to bring these back to the pre-crisis levels,” said Bachhraj Bamalwa, chairman of GJF.

The industry is going back to the days of 1962 and 1992, when the government’s various control measures killed the sector, according to industry players.

“As an independent jeweller, we must say this step is discouraging for organised and progressive jewellers. We need laws that are trustful rather than penalising. The excise duty at one per cent on 30 per cent of invoice value is a step in the wrong direction that will be detrimental and increase the inspector raj,” said Vinod Hayagriv, managing director, C Krishniah Chetty & Sons, a Bangalore-based jeweller.

Source: Business Standard

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