New Delhi: In a major relief to the jewellery industry, the government has decided to ease rules for small jewellers and increased the tax exemption limits but retained the 1 per cent excise duty.
The move follows after a host of recommendations made by the sub-committee of the High Level Committee, headed by Ashok Lahiri, set to interact with trade and industry on tax laws on issues relating to compliance procedure for the excise duty, records to be maintained and other relevant administrative issues.
Government has also decided to increase the SSI Eligibility limit and SSI Exemption limit for manufacturers of articles of jewellery or parts of articles of jewellery or both.
Jewellery stocks today jumped by up to 10 per cent after the government increased excise duty exemption limit for the small scale industry to Rs 10 crore from Rs 6 crore that could bring relief to gold jewellers.
Shares of Tara Jewels soared 10.21 per cent, Shree Ganesh Jewellery House 9.5 per cent and Gitanjali Gems 4.53 per cent on BSE. Tribhovandas Bhimji Zaveri rose 4.3 per cent, PC Jeweller 3.53 per cent and Titan Company 2.77 per cent.
In the Budget, Finance Minister Arun Jaitley imposed a nominal excise duty of 1 per cent without input and capital goods credit or 12.5 per cent with input tax credit jewellery items but promised simplified procedures. However, jewellers went on more than a month long strike to protest the tax and other compliance issues.
Then the Central government constituted a Sub-Committee of the High Level Committee to interact with Trade & Industry on Tax Laws to interact with trade and industry on issues relating to compliance procedure for the excise duty, including records to be maintained and any other administrative issues that may be relevant.
The sub-committee has submitted its report on June 23, 2016, and recommended the following:
a) No requirement to submit any ground plan of the premises for taking Excise registration;
b) Excise duty on jewellery is payable at first sale invoice value;
c) In case the invoice does not show excise duty separately, the value for VAT will be treated as cum duty value (value plus excise duty);
d) No excise duty may be payable on the sale of traded goods;
e) Records maintained for State VAT and other private records, showing details of inputs, stocks, manufactured goods, sold or exported goods to be accepted for excise purposes. Stock details to be maintained on weight and caratage basis;
f) Movement of jewellery, which does not involve sale, for example, movement of jewellery, to be shown as samples, branch transfers not involving sale, for display in exhibition, for hallmarking, and for approval before sale, may not be liable to excise duty. No transit checks by excise officers;
g) When a retail customer brings jewellery (other than in form of gold or any precious metal) to a jeweller which is converted into new jewellery by the jeweller or a job worker of such jeweller, excise duty will be payable only on value addition, including cost of additional materials and labour charges charged, subject to the maintenance of certain records;
h) Repairs and alterations, which do not change the identity, character and use of the goods and do not result in a new item is not “manufacturing” and may not attract excise duty;
i) Excise duty of 1 per cent without input and capital goods tax credit or 12.5 per cent with credit may apply to parts of articles of jewellery, made of platinum, gold and silver;
j) An optional scheme may be prescribed for jewellers who are not able to maintain separate physical stocks or records of manufactured and traded goods. For availing the optional scheme, a principal manufacturer of jewellery shall maintain separate stocks on weight or carat basis separately for:
• Silver studded jewellery;
• Gold or platinum jewellery studded with diamonds; and
• Other gold or platinum jewellery (that is other than gold or platinum jewellery studded with diamonds);
k) No excise audit may be carried out, for the first two years, for units whose duty payment (cash plus credit) is less than Rs 1 crore, (that is turnover of manufactured goods less than Rs 100 crore).
l) No visit, search and seizure at job workers premises;
m) No visit to premises of the principal manufacturer (jeweller), except on the basis of specific intelligence and with the approval of Commissioner or equivalent rank officer;
n) Summons may be issued only with the approval of Commissioner;
"All these recommendations have been accepted by the Government," the finance ministry said.
In this context, independent of Committee’s recommendations, the Government has also decided to increase for manufacturers of articles of jewellery or parts of articles of jewellery or both:
a) The SSI Eligibility limit from Rs 12 crore to Rs 15 crore;
b) The SSI Exemption limit from Rs 6 crore to Rs 10 crore in a financial year and Rs 85 lakh for the month of March, 2016.