 "Jewellers")
The ongoing strike by the Jewellers has now taken a political turn with Delhi Chief Minister Arvind Kejriwal and Congress President Rahul Gandhi extending support. Both the politicians have criticized the government for imposing the tax on ‘poor’ jewellers. This is not the first time excise duty was levied on the sector. In 2012, then finance minister Pranab Mukherjee imposed a duty but after a 21 day strike by jewellers, rolled it back.
Jewellers are striking against the meagre one per cent excise duty imposed by the finance minister in the recent budget. The strike which is now in its second month has reportedly impacted Rs 1 lakh crore of business in the sector. The strike has also impacted gold imports which have fallen to a 29 month low of 12 to 15 tonnes. With 70-80 per cent of jewellers going on strike, the gold import bill is estimated in the range of only $600-700 million.
This standoff raises an important question. Why is the government reluctant to remove such a small duty?
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The duty is in the form of an indirect tax – excise duty, which means that the jeweller need not absorb the burden as is the case with every excisable product. So why are the jewellers protesting if they do not have to absorb the incremental tax?
Jewellers at their end say that they are not against the tax but their protest is against likely frequent harassment by excise officials through raids and calling for irrelevant papers. Jewellers claim they are against the proposed ‘inspector raj’. Ironically politicians supporting the jewellers have been opposing the meagre one per cent hike and not the expected harassment.
Jewellers say that smaller players among them will not be able to maintain their accounts books and comply with the formalities needed for excise compliance. This just cannot be true, especially for jewellers who mostly deal in cash and are known to keep their accounts up-to-date. Further, jewellers are subjected to taxes like VAT by state governments and are adept in keeping the records. Further, such excuses if true applies to all small entrepreneurs.
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Government on their part has constituted a committee to interact with the trade and allied industry on tax laws. With representatives from trade and industry, legal experts and officers from the ministry of commerce and industry, plus the central excise department, a report will be given by the committee in 60 days. The terms of reference will include all issues related to the compliance procedure for the excise duty, including records to be maintained, forms to be filled, operating procedures and any other issues that might be relevant. The government has also promised to conduct no raids, inspection or 'harassment' of jewellers.
Further, the government has said that all payments of central excise duty will be based on first sale invoice value. The central excise authorities will not challenge the valuation given in the invoices, provided the caratage/purity and weight of the gold/silver with precious stones, and carats of diamond/precious stones are mentioned on the invoices. Also, exports of jewellery will be allowed on self-declaration and a legal undertaking to the Customs, without the need to get this ratified by the department. The existing system will continue in this regard, it added.
It has directed the central excise department not to visit manufacturing units or shops or place of business or homes of jewellers. Rarely have we seen government accommodate any industry in such a fashion.
The reason for both the sides being adamant is clearly not on account of excise duty. Revenue generated from imposing one percent will not be enough to even take care of the cost of collecting the tax. Imposition of excise duty is nothing but a step taken by the government to check generation and circulation of black money.
It is a known fact that jewellery competes with real estate to attract black money. Buying gold is far easier than stacking cash. The inventory in a jewellers shop and physical gold he holds would rarely match with the tax return of the jeweller, assuming he files it. If a jeweller cannot maintain his accounts, as alleged by the industry body, it is safe to assume filing a tax return would also be a difficult tax.
By paying the excise duty, even a one per cent duty, would mean that the jeweller and his activity are on the government's radar. Excise duty paid will have to tally with the income generated by the jeweller, including those that are transacted in cash and on purchases made in cash. This would mean that all previous cash purchases will come to light and the jeweller will have to disclose his source of money for buying these gold and jewelleries.
Opening up of previous transactions is what the jewellers really fear. Unaccounted money for purchases is the real issue here.
Clarification
An earlier version of this article wrongly stated that P Chidambaram, as finance minister, had levied excise duty on jewellery in 2012. It was Pranab Mukherjee who had levied it in that capacity. The error is regretted.
Clarification
An earlier version of this article wrongly stated that P Chidambaram, as finance minister, had levied excise duty on jewellery in 2012. It was Pranab Mukherjee who had levied it in that capacity. The error is regretted.
