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Excise on Jewellery from Budget, 2016 – A Controversy

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Excise on Jewellery from Budget, 2016 – A Controversy, The Finance Minister in his latest edition of Union Budget for 2016-17 suggested a levy of excise duty of 1% (without input tax credit) and 12.5 % (with input tax credit) on Gold and jewellery items, this excludes silver jewellery with no diamonds or precious gems. Also an excise burden of additional 1% will befall customers in form of tax deducted at source on purchase of luxury items over Rs. 200000. The jewellery and gems sector articulated strong disappointment over the proposal by going on strikes. Similarly in 2012 Finance Minister P. Chidambaram had to roll back the proposed levy after strong agitation by jewellery and gems industry. Check for more details about “Excise on Jewellery from Budget, 2016” from below….

Excise on Jewellery from Budget, 2016

Impact on the Sector:

India Bullion and Jewellery Association think the excise duty might lead to job cuts in the highly unorganised sector and fear closure of more than 80 percent of jewellery manufacturing units, since the tax is levied only on manufacturers. The tax would only effect manufactures with an annual clearance of 12 Crore or more. However, it is curious to observe that 80% of the gold is consumed by 20% of the income earners in India.

The Tax on gold consumption varies from1 percent to 1.6 percent while normal goods are taxed at 20 percent or more.

The industry experts fear the implementation of excise duty would be hard since the manufacturing in jewellery is highly unorganised. However the experts do not expect the demand to go down.

Proposal by Government:

With the proposal of excise duty the government has also issued guidelines:

  • No interaction with departmental officers, online registration and payment of excise duty and filing of returns.
  • Central excise officers are not allowed to visit any manufacturer.
  • Excise will not be levied on articles of silver jewelry other than diamond and precious gems studded.
  • Excise will only be levied on the principal manufacturer [Rule 12AA of the Central Excise Rules, 2002].
  • The excise duty exemption limit for Small Scale Industries [SSI] has been increased to Rs. 6 crore in a year against previous limit of Rs. 1.5 crore, also on the higher end the eligibility limit of Rs. 12 crore against previous limit of Rs. 4 crore.
  • Hence if a jewelers preceding financial year turnover exceeds Rs. 12 crore, excise duty will be imposed on him. Jewelers with turnover below Rs. 12 crore will enjoy exemption up to Rs. 6 crore during next financial year hence small jewelers will qualify for exemptions up to Rs. 50 lakh by the month of March, 2016.
  • For jewelers to qualify for SSI exemption for March 2016 or full financial year 2016-17, a certificate from Chartered Accountant based on previous year books would suffice.
  • No post registration physical verification of premises, as well as optional centralized registration services to be provided. Also, no need of separate registration. Stress free registrations, within two working days of submission of application.
  • Private, State VAT or Bureau of Indian Standards records to be accepted for all Central Excise purposes. No need to file a stock declaration to the jurisdictional central excise authorities.
  • Month on month payment of excise duty with first installment of March, 2016 to be paid on 31stMarch, 2016.
  • Proposal of easy quarterly return for duty paying jewelers [ER-8].
  • Easy export procedure provided to exempted units [Part III of chapter 7 of CBEC’s Central Excise Manual].

Conclusion:

With the introduction of excise duty on jewellery items in this edition of Union budget, the government expects to increase its revenue to narrow the widening trade deficit. The sector has not reacted positively to this news and manufacturers all over the country have gone on strikes, this has done greater damage to them than the tax levied. In the end it would be interesting to see how the government will implement the proposed levy on the unorganised sector or will it be forced to call back the proposal like 2012.

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About Yash Shah

Yash Shah is passionate article writer and has written more than 100 articles in the field of Finance, Insurance, Stock Market, Company Law, Auditing, Taxation and many others. In case of any queries or suggestions, you can reach the author @ [email protected], you can also catch him on facebook @ yashshah299

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