Branded jewellery makers selling products that do not carry their label will now have to pay excise duty, with the finance ministry trying to plug a gap in taxation rules.

Excise duty on branded jewellery at 1% was introduced in the last budget. To avoid the levy, several manufacturers switched to embossing their brand name only on jewellery pouches and boxes instead of the product, costing the exchequer crores in losses.

"Jewellers misuse the provision and put the brand name only on the packaging to avoid payment of duty...we are examining the issue and a clarification will be issued," a finance ministry official said.

"A customer buys a particular brand of jewellery because he or she wants to buy that brand, even if the piece does not bear it," the official said, adding that this made it clear that the jewellery was a branded product and liable to face duty.

To offer relief to small jewellery makers, the Central Board of Excise and Customs, the apex indirect taxes body, has already exempted jewellery bearing symbol, monogram, label, signature or invented words instead of brand name from excise duty.