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Govt should not roll back key budget proposals so easily
April, 09th 2012

Makers of unbranded jewellery have prevailed upon the government to revisit the Budget proposal to levy a 1% excise duty on their product. The levy will be borne ultimately by the consumer and entails no monetary loss to the jewellers. They claim they are worried about the harassment they could suffer at the hands of excise inspectors, rather than about being brought within the tax net. If so, the task at hand is to streamline administration of the excise department and ensure that the process of collecting the tax places no inconvenience, leave alone harassment, on the taxpayer.

This is an entirely legitimate goal and there is every reason for taxpayers to demand it and for the government to fulfil the demand. But the demand that jewellers should be kept outside the tax net is unreasonable and pre-modern. After all, they claim to comply with value-added taxation (VAT) of jewellery. The levy of a nominal excise duty only serves to generate an additional audit trail.

VAT and excise trails would need to match, to avoid further visits from the taxman. In any case, once a fullyintegrated goods and services tax ( GST) is implemented, indirect taxes would no longer cascade and the incidence of tax would finally be transparently on the consumer.

In any case, the turnover threshold of Rs 5 crore a year would protect small jewellers from coming under the ambit of the tax. Given all this, it is difficult not to suspect that the real motivation behind the jewellers' passionate opposition to the Budget proposal is the audit trail it would generate to their income as well, leading to traditionally untaxed incomes being exposed to taxation. There is no way the government can concede an agitation against paying tax in whatever manner it may be concealed.

Political leaders lending support to the agitation should exert their energies to ensure lawful behaviour by taxmen and ease of compliance by taxpayers, instead of abetting organised tax evasion.

The only justification for the finance minister to yield ground on this demand would be conserving political capital for more drastic measures such as diesel and urea decontrol. All battles cannot be fought at the same time.

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