The Hindu Business Line : Branded baubles to be dearer

WITH the Finance Minister imposing a maiden two per cent excise duty on branded jewellery, the companies are looking at passing on the additional impact to the customer.

"A two per cent impact is quite significant in the jewellery business," Mr Vasant Nangia, Chairman, Oyzterbay, said. Tanishq, the country's largest branded jewellery store operator, said it would not comment as the full ambit of the Centre's move is not yet known.

However, it is not clear how the Budget has defined a branded jewellery enterprise as there is a thin line between a shop name and a brand in the Rs 50,000-core domestic gold jewellery market. Most of the traditional jewellery shops operate more than one store and have alluring campaigns across media at the regional level. The `real' branded jewellery market, with enterprises investing in a brand as against a family promoter advertising the shop name, is pegged at less than Rs 1,000 crore, in which case the Centre's move is not likely to bring many gains to its excise kitty. Further, there is the danger that the excise duty, if applied to them, could prompt some jewellery makers to take their manufacturing underground, industry observers said.

Mr Vijay Jain, CEO, Orra, a diamond jewellery brand, stated, "I believe the imposition of 2 per cent excise duty on the jewellery segment is against the interest of the consumer. Besides, it was not clearly stated in the Budget as to what constitutes a brand. In a market categorised by absence of quality, the branded jewellery segment plays a crucial role in enhancing trust and directly benefiting the consumer by ensuring value for money."

A crystalware company which also sells branded jewellery may qualify for the excise duty reduction of 8 per cent though it is yet not clear whether it will attract the 2 per cent duty imposed on branded jewellery, said a source.

Its jewellery business has until now been attracting a duty of 16 per cent imposed on imitation jewellery. That rate has been halved in this Budget, as imitation jewellery is "products predominantly consumed by the less affluent sections," said the Finance Minister, Mr P. Chidambaram, in his speech today.

It may yet attract the 2 per cent excise on branded jewellery. An explanatory note posted on the Web site of the Ministry of Finance says, "Excise duty has been imposed @ 2 per cent on articles of jewellery, on which a brand name or a trade name is indelibly affixed or embossed on the articles of the jewellery itself."

The company doesn't manufacture its products here but imports them into India, which means it is levied a countervailing duty (CVD) equal to the excise charged on like goods made here.

With the peak rate of customs duty on non-agricultural goods reduced by 5 per cent, it will have a cascading effect on the overall duty component, as CVD is calculated broadly on the value of the product plus the custom duty, the source said.

Nearly a third of the value of the company's sales come from jewellery, and though the Budget proposal may in net bring down its costs, it remains to be seen if price will also come down, he said.

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