Clarifications may be issued on scope of the duty
The Rs 1 lakh crore gem and jewellery industry will not get respite from paying one per cent excise duty on jewellery sold under a brand name. The finance ministry is not convinced with the demands by the industry to roll back the duty. Leading branded jewellers have already started paying the excise duty.
“We are not reviewing the proposal to levy excise duty on branded jewellery,” said a finance ministry official. The finance ministry has announced one per cent duty on branded jewellery as well as any other articles made from gold, silver, platinum, palladium, rhodium, iridium, osmium, or ruthenium manufactured or sold under a brand name.
“Some people had asked us what would comprise branded jewellery and we have explained it to them. We may issue a clarification if the industry has any doubts,” he added.
The notification issued by the ministry has said the hallmark and house-mark reflecting the identity of a jeweller or job worker would not be considered a brand.
It will be classified as branded jewellery if you are putting, for instance, the ‘T’ of Tanishq, the official said. However, trade circles had represented that the excise duty should be only on expensive brands.
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There are several jewellers selling jewellery under their own name and many of them have become akin to brands. But the representatives of the gem and jewellery trade federation who had a meeting with finance ministry officials earlier this week said even the name of a showroom should not be considered a brand. They had also said the problem would be in following the cumbersome excise procedures.
The reality is that the industry is largely unorganised and small jewellers get jewellery made from small artisans. A handful of companies like Tanishq have already started paying the excise duty.
C K Venkatraman, CEO, jewellery division, Titan Industries, said, “Titan has started paying the duty and is hoping that the government will look at reputed local jewellers also as brands, which they are.”
However, Vinod Hayagriv, chairman, the Gem and Jewellery Trade Federation (GJF), said most small jewellers get jewellery made by small artisans, who act as job workers, but they are small and unorganised. Jewellery is then sold at retail outlets. While the artisans’ operations are very small, duty can not be levied on shops as excise has to paid by manufacturers and not traders. This is making the execution a complex issue.
Some excise offices like Bangalore Excise have started issuing notices to jewellers asking them to pay duties on jewellery sold with their brand names.
As virtually the entire industry is in the unorganised sector, with hardly a few having proper manufacturing facilities, execution is difficult and jewellery is sold as the price of gold plus labour charges plus VAT. Having a proper mechanism to collect VAT is also difficult.
The government has said that in the case of duties on branded products, the onus of paying duty lies on brand owners and job workers can pay only on their behalf. However, in the jewellery sector, job workers are artisans and craftsmen who don’t keep formal records. Making them liable to pay excise on behalf of traders could result in artisans moving away from the business for the sheer fear of possible harassment by the excise department.
In 2005-06, when the duty was first levied, the tariff research unit had issued a circular clarifying that “when a jeweller advertises and sells its products under some brand name, it also puts the same brand name or its abbreviation or a mark which has a connection with such brand name on the article of jewellery. Such jewellery will be branded jewellery and will be liable for the tax.” An industry representative said such a clarification should be reissued to identify whether the jewellery is branded or not.