Jewellers may heave a sigh of relief as the government may withdraw the new excise duty proposals on the sector.
In a decision to be taken next week, the finance ministry may remove the duty on both, branded and unbranded jewellery, while continuing with the basic Customs duty structure on gold bars.
The ministry had levied an excise duty of one per cent on branded precious metal jewellery in the Budget this year. In the Union Budget 2012-13, the finance ministry included unbranded jewellery under the excise duty structure. However, jewellers may be subjected to scrutiny for extension of small-scale industry exemption, registration, etc, sources said.
According to sources close to the development, the proposal for tax collection at source (TCS) on purchase in cash of bullion or jewellery in excess of Rs 2 lakh may also get reviewed. Sources said in order to balance the concern of unaccounted funds getting routed through jewellery purchase and harassment to genuine consumers of gold, the threshold for collection of TCS at the rate of one per cent of the sale may be raised.
However, the ministry may continue with the basic Customs duty on standard gold bars, raised from two per cent to four per cent, while on non-standard gold it was raised from five per cent to 10 per cent . In addition to this, basic duty on gold ore, concentrate and dore bars for refining has been enhanced from one per cent to two per cent.
Sources said the Customs duty structure may be retained to address the concern of a growing current account deficit, 50 per cent of which is contributed by gold and other precious metal imports.
In the last financial year, the government had restructured the import duty on gold from an absolute basis to value-based. Accordingly. the import duty on gold was raised from a Rs 300 per 10g to two per cent of the value and import duty on silver was raised from Rs 1,500 a kg to six per cent of the value, to discourage imports and enable better utilisation of forex reserves.
Gold hit a record high on Friday at Rs 29,750 per 10g. Market sources said gold prices are sluggish in international markets and expected to rise only if the global economic situation worsens. They added the sharp fall in the value of the rupee was making the commodity expensive for Indians.