The finance ministry has asked striking jewellers to suggest alternatives to the excise duty on gold jewellery proposed in the Budget before it starts weighing if the duty can indeed be rolled back, senior industry executives said on Wednesday.
However, the ministry has already rejected suggestions from industry executives, including those from the All India Gems & Jewellery Trade Federation (GJF), to raise the import duty on gold to 11% from the current 10% to boost revenue instead of slapping a 1% excise duty (without Cenvat credit) or 12.5% (with Cenvat credit) on gold jewellery, GJF’s Ashok Minawalla told FE. The federation will likely submit fresh recommendations in the next couple of days, he added.
Jewellers complain the excise duty will further raise costs for them and discourage manufacturing, at a time when the government is promoting the Make in India programme. Branded jewellers are also worried due to the fact that jewellery-making is still dominated by the unorganised sector (accounting for 78% of the market share in 2014), which can better evade such duties than the organised one.
The strike against the excise duty, proposed in the Budget 2016-17, has entered the eighth day on Wednesday, with jewellers threatening to go on an indefinite stir. The government had earlier proposed an excise duty in the Budget 2011-12, which had to be rolled back after massive protests by jewellers. Apart from the excise duty, jewellers are also protesting against the mandatory requirement of quoting the PAN by customers for transactions of R2 lakh and above.
Another industry executive said, “The finance ministry seems to have imposed the excise duty not to improve revenue but to keep a track on gold products manufactured in the country, also aimed at cracking down on black money. However, for that, imposing the excise duty isn’t necessary, and we will suggest some measures so that this objective of the government is fulfilled and the duty is rolled back.”
Meet on monetisation scheme on March 18
The finance ministry has convened a meeting on March 18 to discuss how to make the gold monetisation scheme more lucrative. The meeting, to be chaired by economic affairs secretary Shaktikanta Das, is expected to be attended by financial services secretary and representatives of the commerce ministry, the RBI, the World Gold Council, the Indian Banks Association and leading banks like SBI and ICICI Bank. Even refiners like MMTC-PAMP are expected to attend.
However, the government hasn’t called all trade bodies, perhaps due to the fact that associations like the GJF are on strike. So only Indian Bullion and Jewellers Association has been invited and GJF hasn’t so far been asked to attend, said another industry source.
The monetisation scheme has mobilised just over a tonne of gold up to February, while the sovereign gold bond scheme has witnessed subscription of 3.7 tonne in the first two tranches. A third tranche is open till March 14.
