Finance minister Pranab Mukherjee buckled under pressure from two powerful trade lobbies - jewellers and realtors - while dropping proposals put forward by him, ostensibly to check circulation of black money in the economy.

Apart from black money, he has also decided to hold back the shift towards a goods and service tax regime and announced a withdrawal of 1% excise duty on all precious metal jewellery, branded or unbranded, after nation-wide strike from industry bodies.

Following the changes announced on Monday, you will no longer be required to deduct 1% of the transaction value at the time of purchase of property. Similarly, for cash purchase of jewellery, the minister has increased the threshold for tax collection at source from Rs 2 lakh proposed by him on March 16 to Rs 5 lakh now. The TCS threshold for cash purchase of bullion, excluding coin or any item weighing 10 grams or less, has, however, been retained at Rs 2 lakh.

The announcements received unanimous acceptance from jewellery makers, who had been opposing the move since it was proposed in the Budget. "This is a great announcement. The implementation of the excise duty, especially, would have been practically impossible to manage as it is impossible for jewellers to track where a piece of jewellery has been manufactured," said Mehul Choksi, CMD Gitanjali.

Retailers were especially worried over the extensive book keeping that imposing the excise duty would entail. "I think it is a very positive move. Excise compliance norms are very tedious. The proposal had created a lot of pressure on the supply side," said Vijay Jain, CEO, Orra.

The move follows a 21-day strike by jewellers across the country in March this year, after the FM had proposed a 1% excise duty on unbranded jewellery and a 1% tax on all purchases exceeding Rs 2 lakh in the Budget.

According to the government, the move was intended to streamline excise duty that had already been levied on branded jewellery in March 2011. Post the strike, the finance minister had met jewellery associations in early April giving them an assurance that the excise duty would be rolled back.

"Most of the jewellery sector is unorganized. Especially for the small scale buyers and craftsmen, this would provide a huge relief," said Ved Prakash, director, MMTC. Branded jewellery makers said the rollback has removed uncertainty in the sector, already marred by the increase in customs duty. Customs duty on gold had been increased from 2% to 4% in the Budget 2012 prompting most jewellers to take a price hike in the range of 2-7%. Customs duty on gold had been also doubled in January from 1% to 2%. A levy of excise duty would have hiked prices further, jewellers said.