Union finance minister Arun Jaitley, in his budgetary proposals for 2016-17, announced excise duty of 1% on non-silver jewellery. The jewellers and bullion traders in the country responded by launching an indefinite, nationwide strike on March 2. Despite assurances from the Centre, they have continued their protest. The protesting jewellers – there are thousands of them in Punjab, Haryana, Himachal Pradesh and Chandigarh – took their fight to the next level on Monday by blocking rail and road traffic in different parts of the region. HT cuts through the noise and takes a closer look at the stand-off:
What is the issue?
The finance minister proposed excise duty of 1% on jewellery without input credit or 12.5% with input tax credit on articles of jewellery, excluding silver jewellery other than those studded with diamonds and some other precious stones. The government move is aimed at bringing the gems and jewellery industry that is still largely an unorganised sector into the tax net. Jewellery, being a luxury item, cannot be allowed to go untaxed, it argued. The reason: the sector, where cash purchases made on ‘kachhi parchis’ are not uncommon, contributes to accumulation of black money in the economy. India is one of the largest consumers of gold jewellery in the world.
Why the strike?
Jewellers, who are also opposed to the government move to make the permanent account number (PAN) mandatory for purchase of jewellery worth more than Rs 2 lakh, are up in arms over the excise tax, alleging ‘return of inspector raj’. The move, according to them, will not only put additional burden on buyers, but also worsen the market sentiment already hit by the decision to make PAN a must. The excise duty would mean more paperwork, pressure for compliance and “unnecessary harassment”. Then, there are other “irritants” such as tax collection at source on sales of `2 lakh and above and the system of unique identification number (UID) on each jewellery item hallmarked in India aimed to curb duplication and ensure traceability. Jewellery retailers have been having issues with the extent and mode taxation since long. However, Vinod Talwar, the president of the Jewellers’ Association of Chandigarh, says jewellers do not have a problem with paying 1% more tax, but they do not want interference of the excise department. “I agree that maximum amount of black money is spent on gold, but people use it to buy pure gold, not jewellery. The government can ban the sale of pure gold,” he suggests.
Who has been hit?
The indefinite strike, which entered its 26th day on Monday, has left thousands of artisans working for jewellers and manufacturers without work and, in many cases, without wages. It has also taken the sheen off weddings. While customers have the option of buying jewellery from branded stores in cities like Chandigarh, most jewellers in many parts of the region have kept their shutters down. But they, too, are helping out their “regular customers” by delivering on their pre-strike orders or by selling available jewellery items to them. “Most of us keep stock of ornaments at home. A few others open their shops for two hours early in the morning to meet the demand,” confided a jeweller in Amritsar on condition of anonymity. In small towns such as Jandiala Guru and Majitha, the strike call has got a lukewarm response. The standoff has hit business and, consequently, government revenue.
The Centre has set up a task force under former chief economic adviser Ashok Lahiri to look into the demands of jewellers, giving it 60 days to ascertain issues pertaining to procedures for excise duty, maintenance of records etc, but it has not worked. While the protesting jewellers are adamant, the central excise officials dismiss apprehensions regarding return of ‘inspector raj’. Says commissioner, Central Excise (Chandigarh-I) Kishori Lal: “There are strict instructions from the Central government that in normal circumstances no official from the department will visit the premises of jewellery manufacturers and the department will depend on the assessee’s self declaration.” Artisans, who manufacture jewellery on a job work basis, are not required to pay the duty. Also, small jewellers will be eligible for exemptions up to a certain limit.
(With inputs from Surjit Singh)