The one per cent Central excise duty on manufacture of jewellery would apply to not only new articles but also those that are made by exchanging or melting old jewellery, the Central Board of Excise and Customs (CBEC) on Tuesday said.

“The tax is on the manufacture. So it would apply on any kind of manufacturing of jewellery, irrespective of whether it is made from fresh or old gold,” said AK Gupta, Chief Commissioner Excise, Delhi.

The Union Budget 2016-17 has proposed imposing a one per cent excise duty (without input tax credit) and 12.5 per cent (with input tax credit) on articles of jewellery.

In a bid to pacify jewellers, who have been protesting against the proposal, the CBEC promised zero physical interface with tax officials and said there would be no “inspector raj”.

Jewellers have been on an indefinite strike since March 2 against the proposed tax.

“There have been sufficient instructions from the Finance Minister and the CBEC that officials should not visit the premises of the jewellery manufacturers,” said Gupta, adding that they should not be worried of harassment by tax officials.

He also stressed that the move was aimed at including gold jewellery within the tax net in preparation of the goods and service tax regime (GST) and monitoring of black money was only part of the reason.

“According to estimates, there is about 22,000 MT of gold with households in India of which 600 MT is used for making jewellery. At least a part of it should accrue to the government as tax,” he reasoned, adding that it is an indirect levy and would be ultimately borne by the customer.

The CBEC has also argued that the tax would not impact small jewellers and would be on large manufacturers with clearance of over ₹12 crore annually

Finance Minister Arun Jaitley had on Monday also ruled out rolling back the tax and had said the move was aimed at aligning gold with GST.

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