Don't let gold jewellery out of excise net

Soon after March 16, when the Union Budget proposed to hike tax on gold in all its forms, jewellery makers across the country rose as one to protest. After 20 days of striking work and vociferously opposing the levy of excise duty, particularly on unbranded gold jewellery, they have resumed business.

The jewellers claim to have gone back to their calling following the Finance Minister's assurance to look into their demands, especially on the excise levy.

They have made it clear that the strike has been suspended till May 11, by which time they expect the Government to roll back some of the ‘harsh' proposals. So much is in public domain through news reports in the print and electronic media. What is less known is that most jewellers have turned impatient and are averse to losing business, especially in the ongoing marriage season.

Indian marriages are known for the splurging on gold jewellery. Additionally, a big day for gold sales is Akshaya Trithiya — an auspicious day when people buy some precious metal — which falls on April 24.

If the strike had continued, jewellers would stand to lose heavily. So, suspension of the strike is some kind of a tactical retreat by the jewellery makers. The logic is “today's business is more important than a promised tax relief tomorrow.”

Fear of excise

Why is the jewellery industry afraid of excise duty? The kind of recordkeeping the excise regime stipulates makes it nearly impossible to evade taxes.

Excise officials usually take a comprehensive view of business and insist on clear documentation for the business end-to-end. It covers raw material purchase, storage, processing, finished product inventory, sales and movement of finished goods, cash flow, energy consumption, wages, and so on.

Such documentation leaves a clear audit trail and makes manipulation or duty evasion nearly impossible. This is what the industry seems to be against. And this is clearly indefensible.

It would be a pity if the Finance Minister succumbs to lobby pressure. Already, parochial sentiments have been unleashed with claims that thousands of Bengali workers and artisans would be rendered jobless if unbranded gold jewellery is brought under the excise duty net.

The Government should not give into this kind of emotional blackmail. Indeed, some industry representatives have claimed losses of over Rs 20,000 crore in business because of the prolonged strike.

If this is the kind of turnover, there is case for seriously investigating whether appropriate or commensurate taxes are actually being collected from this sector.

The Finance Minister must demonstrate that he is sympathetic to the genuine grievances of the jewellery makers, but would not compromise on pro-revenue proposals in the Budget.

If anything, the country's gold jewellery industry — both organised and unorganised — needs strong regulatory oversight in the interest of hapless consumers.

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