After announcing the review of its budgetary proposal to tax provident fund withdrawals, the government may have to do the same in relation to the 1% excise duty imposed on jewellery sales.
Protesting the move, jewellers across India initiated a three-day strike from Wednesday. Industry estimates peg the loss in business at about Rs 5,000 crore as the strike will bring one of the largest export sector of India to a standstill.
“The measure was a completely unexpected and uncalled as the gems and jewellery industry has never been under excise duty due to its unorganised and fragmented composition,” said GV Shridha, chairman of Gems and Jewellery Trade Federation.
Finance minister Arun Jaitley in his latest Budget proposed a levy of 1% excise on jewellery sales.
The move that has been tried earlier in 2005 and 2012 by the UPA government. But, the BJP, which was then in the Opposition, had sided with the jewellers to protest the levy. The moves had to be withdrawn both the times.
The levy apart from making products costlier will further push away the customers. The sector is already grappling with the impact of the government making PAN number mandatory for all transactions of or above Rs 2 lakh. The industry had organised a one-day strike last month against this measure too, saying since 80% of the country didn’t have a PAN card, this would deter gold purchases.
“It’s very difficult to levy excise on jewellery as the product changes hands often, and there are various inputs that happens frequently,” said Praveen Shankar Pandya, chairman of the Gems and Jewellery Export Promotion Council. “While the government doesn’t want to tax the artisans, the excise burden could also include the retailer, who is essentially a trader.”
The strike saw mixed response on Wednesday with most gold jewellery establishments remaining closed in Mumbai and Delhi and in several big cities.