Industry & Economy
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Gems & Jewellery
Excise levy angers jewellery makers
Our Bureau
Mumbai
,
Feb. 28
THE proposed two per cent excise duty on branded jewellery has angered gold jewellery makers and makers of diamond and other high-value jewellery.
The protest is primarily on the grounds that branded jewellery is an emerging segment and that a fiscal burden at this stage would discourage the makers. Some argued that jewellery exports might be affected.
There is an increase in the number of branded jewellery players in the country. The jewellery market is getting flooded with competitive brands.
In past two years, over 28 brands have been launched.
The branded jewellery market in the country is over Rs 800 crore, while the diamond market is over $1.4 billion. For the last 10 years, the market for diamonds has been growing at an average rate of 15 per cent annually.
The industry is concerned about the proposal to levy 2 per cent excise duty on branded jewellery at a time when the industry is promoting branded jewellery. This levy will be detrimental to the growth of exports. Hence, GJEPC has requested a repeal of this provision, according to Mr Bakul Mehta, Chairman of the Gem & Jewellery Export Promotion Council.
However, consumer reaction is somewhat muted. A few high-income professionals this correspondent spoke to, while expressing some displeasure over the tax proposal, did not attack the move.
"Revenue considerations might have prompted the Finance Minister to make the proposal," conceded a chartered accountant.
Rapid economic growth and quality considerations have encouraged consumers to take to branded jewellery.
By nature branded jewellery items are value-added products and are known to leave a decent margin for producers.
A two per cent fiscal imposed on high-value luxury goods such as branded jewellery is unlikely to hurt ordinary consumers, argued an economist.
It was perhaps for this reason that the plea to reduce import duty on gold jewellery was not entertained.
The contention that jewellery exports would be discouraged does not hold, because the duty drawback facility will neutralise the excise duty burden.
Making of branded jewellery is an organised business and many new entrants are expected to come in.
When brought under the excise net, all the makers can band together and bring discipline to the industry.
They can also jointly pressure the unorganised players to fall in line in terms of product quality.
In order not to displease ordinary consumers, Mr Chidambaram has left the rate of Customs duty on gold imports untouched.
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