Government refuses recall of 1% excise duty on jewellery

Tearing into the opposition charge that imposition of the levy was killing the trade, Finance Minister Arun Jaitley refuted the allegations saying when items of common use were being taxed, how could luxury items be kept out.

Asserting that there was absolutely no harassment of artisans, Jaitley said corporate jewellers with upto Rs 12 crore turnover last year came under its ambit and upto Rs 6 crore turnover in a fiscal later are exempt from it.

"Clearances up to Rs 6 crore in a financial year (if clearances during preceding year were less than Rs 12 crore), are exempt from this duty," Jaitley said, adding "thus small jewellers and artisans are not covered within the ambit of this levy."

Replying to a calling attention on the issue, the Minister said "when there is excise duty on items like soap, toothpaste, razor, pencil, ink, fruit juices and baby food, why should the luxury items be exempted from it."

Opposition members had earlier charged the government of killing the traditional jewellery trade and promoting the big brands by imposing the levy. The jewellers have been on a nationwide strike for over 40 days to protest the levy.

Jaitley said even imitation jewellery attracted 6 per cent excise duty and added that when things used by common people were taxed "how can luxury items be out of its ambit for so long."

He said the opposition should understand that it is a complex subject and when taxes are levied on items like steel, cement and clothes, luxury items cannot be out of its purview.

"We have to decide on which items we will impose excise duty and if there is any structured trade, they do not get the right to resort to agitation against tax," he said and challenged the opposition that if they were so concerned about it, they should get the 5 per cent VAT removed in Kerala.

"Each state imposes VAT on gold and in Kerala it is as high as 5 per cent and if you (opposition) are so much concerned then get it removed from Kerala," he said.

Dismissing charges that excise duty has hit hard small artisans, the Minister said the trade has not developed such that annual turnovers of small jewellers has crossed Rs 6 crore and stressed that "this is implemented on big chains."

Jaitley said the UPA government had imposed taxes on jewellery in 2005 but had recalled it in 2009 in the face of stiff opposition. It again imposed it in 2012 but recalled the same again.

The Finance Minister said the levy was a step towards implementation of GST and if luxury items were not taxed, "you can never reach 18 per cent (GST rate) cap."

To ensure that there is no harrassment to jewellers, the government has for the benefit of gold trade provided for no physical verification, he said, adding the jewellers have been asked to pay excise duty with self certication on VAT returns.

Refuting the opposition charges of harrassment of jewellers by excise officials, Jaitley said, "if any excise official or Khaki dressed men harrasses, any jeweller just needs to click a snap on their mobile and send it to me."

To address their concerns, the government has even formed a committee, headed by former Chief Economic Advisor Ashok Lahiri, and three of the representatives of jewellers will be included in it. It is upto the jewellers to decided on their representatives as there are dozens of organisations,

Jaitley said.

On registration of jewellers, he said so far 206 registrations have come and the deadline for it has been extended till June 30 from March 31. Statistics show that consumption of gold is highest by those in the higher income group compared to those in the lower income group and thus the levy of excise duty would not affect small consumers.

The Finance Minister said that a peculiar aspect of gold trade is "the bigger the ban, the higher the smuggling". So government has allowed even small jewellers to import as the UPA government had allowed only 6-7 importers to do so.

The country has appetite for gold and if custom duty of 10 per cent is increased then there will be smuggling, he said and added that only excise duty could be imposed on gold as service tax cannot be imposed.

"Domestic demand of gold is almost solely met by imports. During last three years, imports of gold were 625 MT, 1100 MT and 936 MT resulting in substantial outflow of precious foreign exchange," Jaitley said.

He added "gold attracts import duty of 10 per cent. Gold jewellery attracts 15 per cent import duty. However, India has signed FTA with many countries, wherein import of gold jewellery is allowed at nil preferential rate of import duty.

This levy will result in 12.5 per cent CVD on imports of jewellery, checking these imports and providing additional protection to domestic industry."

He said the government is committed to even check the real esate and film industry which earlier was known for cash transactions but now white money transaction is taking place there.

Raising the issue of excise duty through a calling attention motion, Raj Babbar (Cong) demanded rollback of the duty saying that government was killing the trade and local artisans were most impacted by it.

He said such an attempt in the name of checking black money was not justified and in a way government was promoting big jewellery brands and torturing the small goldsmiths.

Babbar said jewellers had taken to streets for 43 days because of the excise duty as while they do not mind paying the taxes, they were against the procedure which will result in harassment of millions of artisans.

"The government is marketing its policy of 'Make in India' but because of this the artisans would lose their livelihood...About 12 artisans/jewellers have committed suicide," Babbar said.

He said Prime Minister Narendra Modi when he was Chief Minister in Gujarat had tweeted on March 28, 2012 that imposition of 1 per cent excise duty then was wrong and should be recalled.

D Raja (CPI) said such a levy has put the livelihood of thousands of workers at stake while Naresh Agarwal (SP) said the issue was serious as 12 artisans had committed suicide.

Kumari Selja (Cong) too urged the government to recall the levy saying traditional artisans were impacted by it. Sharad Yadav (JD-U) said India had its unique identity globally of its masterpieces like Taj Mahal, Ajanta and Ellora caves, which account for its artisans and workers.

He said any such move to harass artisans was bound to impact India's image while Anil Desai (Shiv Sena) said such a levy will result in Inspector Raj which is bound to kill the industry.

Bhupinder Singh (BJD) sought to know the logic behind the levy if GST was on the anvil and said it would impact world-famous Odisha artisans.

Basavraj Patil (BJP) also expressed apprehensions that such a move will result in fear among traders, while Satish Chandra Misra (BSP) said the move has impacted 1.5 crore artisans.

Later, dissatisfied with the reply of the Finance Minister, Congress and SP members staged a walk out.