Press reports after the presentation of the budget on
16.03.2012 indicate that the full import of the provisions contained in the
legislation related to the levy of excise duty of 1% on precious metal
jewellery are not clear to the trade.
In the Budget for 2011-12, full exemption from Central
Excise duty was withdrawn on 130 items which were being charged to State VAT in
a bid to signal movement towards the Goods and Services Tax (GST). As part of
this proposal, with effect from 1st March, 2011, Government levied an excise
duty of 1% on precious metal jewellery – but only on goods manufactured or sold
under a brand name. This rate was applicable if no Cenvat credit of duty paid
on inputs or input services is taken. There have been disputes about the
interpretation of the term “branded” jewellery as unlike other goods the brand
name is not always affixed on the goods themselves.
In order to streamline the levy, the scope of the levy has
been altered to include both branded and unbranded jewellery within its scope.
However, several provisions have been incorporated to make the levy simple in
its operation and keep small artisans and goldsmiths outside its purview. The
important ones are as under:
i)The duty is chargeable
on a tariff value equal to 30% of the “transaction value” declared on
the invoice and not on the full value of the transaction except where the
retail customer provides the gold or old ornaments for remaking.
ii)At the current prices of gold of approximately Rs.27,000
per 10 grams, the duty payable works out to a nominal amount of about Rs.84 per 10 grams.
iii)Recognising the fact that most jewelers get jewellery
manufactured on job-work from small artisans and goldsmiths, the responsibility
of registering with Central Excise authorities and paying the duty has been assigned
to the “principal” manufacturer who gets the goods manufactured. In other
words, those artisans or goldsmiths who only manufacture jewellery for others
on job-work need not obtain registration.
Even if artisans and goldsmiths manufacture and sell
jewellery themselves, the benefit of small-scale exemption is available. It has
also been provided that for the purpose of this exemption, the aggregate value
of clearances would be computed on the basis of tariff value i.e. 30% of the
transaction value.
iv)Small-scale exemption is available to any manufacturer
whose annual turnover in the previous year did not exceed Rs. 4 crore. Full
exemption from duty is available to such manufacturers for an annual turnover
of 1.5 crore in the current year.
v)Taking an average price of gold to be Rs.27,000 per 10
grams, the exemption implies that those who manufactured upto 49 kgs of
jewellery in the previous year would be exempt from duty for clearances of 18.5
kgs of gold this year. As a result, most of the small artisans and goldsmiths would
remain exempt.
vi)Full exemption from excise duty has been provided to
branded silver jewellery. This implies that silver jewellery, whether branded
or unbranded is fully exempt from excise duty.The trade has expressed
apprehensions that the levy would result in
“inspector raj’. It would be recalled that the Government has already
prescribed a simple one-page return for all units manufacturing excisable goods
under the 1% scheme. This is a quarterly return which can be filed
electronically. Since gold jewellery is leviable to State VAT, these units are
already maintaining records/ accounts for that purpose. No separate records
have been prescribed under Central Excise law.
