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Things You Should Know About Excise Duty on Jewellery

The Central Government proposed to impose excise duty on manufacturing of jewellery except silver jewellery (other than studded with diamond and precious stones) in the Union Budget. However, the jewellers protested against such levy of excise duty. They went on strike across the Country demanding withdrawal of excise duty levy on jewellery. Finally the Govt. did not change its stance and retained such levy in the Finance Act, 2016.
Now the rate of excise duty on jewellery is 1% if assessee does not avail of any credit on inputs and capital goods. However, the rate of excise duty will be raised to 12.5% if assessee avails of credit on inputs and capital goods.

Recently the CBEC has issued set of Circulars and Notifications with regard to excise duty on Jewellery. Key takeaways from such Circulars/Notifications are given hereunder:

1. All persons engaged in manufacturing jewellery should take Excise registration before July 31, 2016. Even if jewellery is manufactured via job-worker then also only Principal-manufacturer is required to take Excise registration.

2. Jewellers exporting 100% of jewellery are not required to take Excise registration. But they will have to furnish a bank guarantee.

3. On recommendation of Sub-Committee constituted to interact with Trade & Industry, the Central Government has increased the higher threshold exemption limit from Rs.6 Crore to Rs.10 Crore and eligibility limit from Rs.12 Crore to Rs.15 Crore for jewellery manufacturers. Earlier, higher threshold limit of Rs.6 crore for SSI exemption was prescribed with eligibility limit of Rs.12 crores for jewellers.

4. The SSI exemption should be calculated individually for each jewellery manufacturer irrespective of number of job-workers or number of premises from which his job-worker operates. This will also apply for determining eligibility of jewellery manufacturer for SSI exemption.

5. If jewellery is manufactured out of jewellery or precious stones supplied by the individual retail customers, then only value of additional material used will be considered to compute aforesaid limits of SSI. . Moreover, the duty liability will arise only on value of additional materials used by manufacture in addition to jewellery or precious stones supplied by the individual retail customers.

6. If multiple manufacturers which operate from same premise but take separate excise registration, then value of all clearances of all such manufacturers will be clubbed to determine SSI exemption and eligibility exemption limits.
Things You Should Know About Excise Duty on Jewellery

7-Following items shall not be included for calculating the eligibility and exemption limit for SSI:
  a) Jewellery exported to foreign countries (except Bhutan).
  a. Jewellery sold as a trader.

8. No excise audit will be carried out for jewellery manufacturer in first two years if their duty liability during the financial year is less than Rs.1 crore. Jewellers who are liable to pay duty more than Rs.1 crore but less than Rs.2 crore may be audited once in every two years. And jewellers who are liable to pay duty more than Rs.3 crore may be audited every year.

9.After expiry first two years:
  i. Commissioner will select maximum 5% of total jewellers who are liable to pay duty less than Rs.50 lakh for excise audit.
  ii. Jewellers who are liable to pay duty more than Rs.50 lakh but less than Rs.1 crore may be audited once in every five years.
Note: However, such audit will under no circumstances involve any physical verification of jewellery stock in the premises.

10. Departmental officers will not do transit checks for checking movement of semi-finished or finished articles of jewellery.

11. Commissioner can visit and search premises of jewellery manufacturer only if he has reason to believe that there is evasion of excise duty. However, search cannot be undertaken for procedure or compliance related matters.

12. Commissioner cannot arrest jewellery manufacturer where duty evasion is up to Rs 2 crores.

13. Commissioner can initiate search and seizure where expected evasion of duty is more than Rs.75 lakhs.

14. Repairs and alterations in Jewellery articles will not attract excise duty if it does not change the identity, character, use of jewellery and do not result in new item.

15. Jewellers which manufactures jewellery from jewellery or precious stones supplied by a retail customers should maintain record of following particulars:
  a) Name and address of retail customer.
  b) Weight and purity of material provided by customer.
  c) Receipt number and date.
  d) Value of additional material used in manufacturing and labour charges

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