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Luxury item like gold jewellery cant stay out of tax net
April, 29th 2016

The government has ruled out rollback of 1% excise duty on gold jewellery levied in the budget, calling it a tax on a luxury item. Finance minister Arun Jaitley said gold cannot remain out of the tax net when goods used by common people were being taxed.

Jaitley referred to items like soap, toothpaste, razor, pencil, ink, fruit juices and baby food attracting excise duty. "Why should the luxury items be exempted from tax," he said, responding to a calling attention motion in Rajya Sabha. He added that even imitation jewellery attracted 6% excise duty.

Rubbishing Congress leader Raj Babbar's charge that government was killing the trade and hurting local artisans, the finance minister reasoned that trade had not developed to the extent that annual turnovers of small jewellers had crossed Rs 6 crore. "This is implemented on big chains," he said, adding it was a step towards implementation of the goods and services tax (GST).

Maintaining that a 18% GST rate cannot be reached if luxury items were not taxed, he said the levy will be imposed only on corporate jewellers having a turover of up to Rs12 crore last year.

"Small jewellers and artisans are not covered within the ambit of this levy," FM said While referring to states levying value added tax (VAT) on jewellery, Jaitley said if states felt the levy was not in order they should first remove VAT.

"Each state imposes VAT on gold and in Kerala it is as high as 5%. If you (opposition) are so much concerned then get it removed from Kerala," he said. Jaitley recalled that the UPA regime had imposed taxes on jewellery in 2005 and withdrawn it in 2009 in face of stiff opposition. It again imposed it in 2012 but the decision was rolled back again. Miffed Congress and Samajwadi Party staged a walkout from the House.

Sticking to his decision, the minister added, "We have to decide on which items we will impose excise duty and if there is any structured trade, they do not get the right to resort to agitation against tax."

Jewellers have been on strike since the budget protesting against the levy on the grounds that it will lead to harassment. He allayed jewellers' fears citing there will be no physical verification and tax can be paid on self-certification based on VAT returns.

"If any excise official or khakidressed man harrasses, jeweller just needs to click a snap on their mobile and send it to me," finance minister said. The government has also formed a committee under former Chief Economic Advisor Ashok Lahiri that would also include three representatives of jewellers to address their concerns. So far, 206 jewellers have registered and the deadline for it has been extended till June 30 from March 31.

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