"15"
                                                                                 pib.nic.in
                           PRESS INFORMATION BUREAU
                             GOVERNMENT OF INDIA
                                      *****

  CBEC CLARIFIES ON LEVY OF EXCISE DUTY ON PRECIOUS METAL
                         JEWELLERY


                                                                New Delhi.: Phalguna 30, 1933
                                                                              March 20, 2012


        Press reports after the presentation of the budget on 16.03.2012 indicate that the
full import of the provisions contained in the legislation related to the levy of excise duty
of 1% on precious metal jewellery are not clear to the trade.

          In the Budget for 2011-12, full exemption from Central Excise duty was
withdrawn on 130 items which were being charged to State VAT in a bid to signal
movement towards the Goods and Services Tax (GST). As part of this proposal, with
effect from 1st March, 2011, Government levied an excise duty of 1% on precious metal
jewellery ­ but only on goods manufactured or sold under a brand name. This rate was
applicable if no Cenvat credit of duty paid on inputs or input services is taken. There
have been disputes about the interpretation of the term "branded" jewellery as unlike
other goods the brand name is not always affixed on the goods themselves.

        In order to streamline the levy, the scope of the levy has been altered to include
both branded and unbranded jewellery within its scope. However, several provisions
have been incorporated to make the levy simple in its operation and keep small artisans
and goldsmiths outside its purview. The important ones are as under:

              i)The duty is chargeable on a tariff value equal to 30% of the
              "transaction value" declared on the invoice and not on the full value of
              the transaction except where the retail customer provides the gold or old
              ornaments for remaking.

              ii)At the current prices of gold of approximately Rs.27,000 per 10 grams,
              the duty payable works out to a nominal amount of about Rs.84 per 10
              grams.

              iii)Recognising the fact that most jewelers get jewellery manufactured on
              job-work from small artisans and goldsmiths, the responsibility of
              registering with Central Excise authorities and paying the duty has been
              assigned to the "principal" manufacturer who gets the goods
              manufactured. In other words, those artisans or goldsmiths who only
              manufacture jewellery for others on job-work need not obtain registration.
              Even if artisans and goldsmiths manufacture and sell jewellery themselves,
              the benefit of small-scale exemption is available. It has also been provided
              that for the purpose of this exemption, the aggregate value of clearances
              would be computed on the basis of tariff value i.e. 30% of the transaction
              value.

              iv)Small-scale exemption is available to any manufacturer whose annual
              turnover in the previous year did not exceed Rs. 4 crore. Full exemption
              from duty is available to such manufacturers for an annual turnover of
              Rs1.5 crore in the current year.

              v)Taking an average price of gold to be Rs.27,000 per 10 grams, the
              exemption implies that those who manufactured upto 49 kgs of jewellery
              in the previous year would be exempt from duty for clearances of 18.5 kgs
              of gold this year. As a result, most of the small artisans and goldsmiths
              would remain exempt.

              vi)Full exemption from excise duty has been provided to branded silver
              jewellery. This implies that silver jewellery, whether branded or unbranded
              is fully exempt from excise duty.

         The trade has expressed apprehensions that the levy would result in "inspector
raj'. It would be recalled that the Government has already prescribed a simple one -page
return for all units manufacturing excisable goods under the 1% scheme. This is a
quarterly return which can be filed electronically. Since gold jewellery is leviable to State
VAT, these units are already maintaining records/ accounts for that purpose. No
separate records have been prescribed under Central Excise law.
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