India’s Finance Minister (FM) Mr. Pranab Mukherjee has at last bowed down against the massive pressure put forward by gem & jewellery industry and decided to roll back the excise duty on branded and unbranded jewellery
with effect from 17th March, 2012.
The FM in his Union Budget presented last month had proposed to levy 1% excise duty on unbranded jewellery. The move was supposed to add Rs. 150 to 200 crore to the government treasury. Excise duty on branded jewellery has already been levied before two years but now the government has decided to abolish the duty from both branded and unbranded jewellery.
The FM had also announced provision of tax collection at source under which a customer buying jewellery above Rs. Two lakhs would have to pay 1% additional tax. This proposal has also been revised and now the threshold limit has been hiked to Rs. 5 lakhs.
India’s government has also given relief to foreign institutional investors by postponing application of the General Anti Avoidance Rules (GAAR) to the new financial year commencing from March 2013. Mr. Mukherjee also made provisions which would allow tax authority to examine any structure to see if it has been created only to avoid tax liabilities.
The move by the FM has provided much needed fillip to local traders as well as exporters who have lost a massive business (about Rs. 20,000 crore) due to the 21-day strike to protest against unfavorable budgetary provisions. They are now in an ecstatic mood and encouraged to take full advantage of wedding and festive seasons to recover their losses.
Retailers here have decided to offer 25% discount on making charges on all types of jewellery. The offer, first of its kind uniform discount offer from all jewelers of India would be effective from next week and would be valid for 10 days nationawide.
Mr. Mehul Choksi, chairman and managing director of India’s leading branded jewellery retailer, Gitanjali Gems says, “Players of both the unorganized and organized sector and branded jewellery retailers are taking part in this special discount offer. It is a good move to boost overall sales during the ongoing lean season.”
While Tanishq, another large branded jewellery retailer in India, has adopted its own strategy to boost its sales during the current season. Mr. Sandeep Kulhalli, Vice-President (Retail and Marketing), of the company says, “Some of our offers may coincide with the industry’s current move, but we can’t specifically say we are participating in the discount offer. Each brand has its own significance and hence, the offer varies from brand to brand.”
Mr. Rajiv Jain, Chairman of India’s Gem & Jewellery Export Promotion Council (GJEPC) on the other hand is not impressed with this discount scheme. He feels the loss incurred by the industry during the protest may not be recovered. “Sales are very thin. The strike period (wedding season) was the boom season for the industry. Even a 25 per cent discount on making charges may not encourage consumers to pick gold and diamond jewellery to the tune they would have otherwise bought during the season,” he said.
Bachhraj Bamalwa, Chairman of All India Gems & Jewellery Trade Federation (GJF), said, “We are delighted that the government has understood our problems thoroughly. Had this excise duty not been rolled back, many small and medium jewellers and artisans would have gradually shut down their shutters. In the next four-five years, the impact would have been severe. Now, with this roll-back, the industry’s sentiment has been reinstated.”
This move is expected to boost demand in India, increasing imports and bolstering global gold prices after they climbed 4.9 per cent this year. Local demand would certainly recover from now and imports would also improve because jewellers who had not stocked up earlier will start buying now.
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