No Happy Ending for Jewellers

After six weeks strike in protest against imposition of excise duty of 1 per cent, all striking jewellers and traders have resumed back to work. The strike was called-off after several meetings with the union ministers.

An indefinite strike by jewellers and traders to protest against imposition of excise duty of 1 percent was called off on April 13. The Union Budget 2016 gave bullion a big blow with levy of one per cent excise duty of gold and diamond jewellery without input credit, contrary to expectations of cut in gold import duty. To protest against excise duty, entire industry has declared indefinite strike since March 2.

At least 90 percent of jewelers from around the country returned to work on April 13, but negotiations between members of various associations and the government will continue. The strike was called off following indications the government won’t budge on the new 1-percent excise duty imposed this year. The decision comes before the festival of Akshaya Tritiya on May 9, auspicious time to buy gold.

In the first few weeks of April, in an attempt to put in their demands, jewellers and bullion traders from all over the country constituted All India Jewellers Excise Action Committee (AIJEAC). The Committee had submitted a memorandum to various senior ministers in New Delhi, mentioning their demands.

Dr. Suresh Surana, renowned CA from RSM Astute Consulting Pvt. Ltd opines, “Even though the rate of excise duty is merely 1 per cent (without CENVAT Credit) the additional cost of compliances to excise regulations shall be a bitter pill. However, eligibility of CENVAT credit on Input Services can be blessing in disguise for retail jewelers. ‘Inspector Raj’ itself may not be back but litigation mainly on account of valuation, clandestine removal, person liable to pay duty will be outrageous due to lack of clarity in law.”

Heavy losses incurred due to strike

For the past 42 days, due to the strike, jewellers had not just suffered losses in business but also faced a hard time in retaining their artisans and paying rent for their premises. The resumption in trade could increase demand from the second biggest gold consumer in the world and support the global prices of the bullion. About two-third of skilled workforce in jewellery sector has left for their hometown or switched to alternative means of livelihood due to the current strike over excise duty levy. These workers belong to West Bengal and Bihar. They have left for their hometown in large number. According to trade sources, workers have left from all across the country for their hometown. The gems and jewellery industry is estimated to have incurred over `1 lakh crore loss due to the 42-day strike.

Over 200,000 skilled and unskilled workers are employed largely on daily wage basis in the popular Zaveri Bazaar market alone. Normally, they get salary on weekly basis for the number of days worked and additional sum for overtime work they do. But, due to strike, they had survival problems as their weekly salary had stopped. Abrupt departure from the industry in bad taste impacted jewellery sector badly in the long term. Not only jewellery shop owners spend thousands of rupees on their training in a professional institute and retain them as loyal employees throughout their lives, but also their return to the jewellery industry becomes difficult once they move out.

Surana states, “As excise duty is on manufacturing activity which gets crystallized at the time of removal from factory or workshop, the thrust on record keeping will be more now than ever. Industry though can take this as an opportunity to be GST ready, which is just around the corner. With harsh penal provisions under Excise Laws, new assessee registering with excise department will need to be vigilant and needs to re assure themselves about their compliances.”

Jewellers rush to register with the excise department

After calling off the strike, jewellery manufacturers are considering speedy registration with the excise department, so that they can do hassle-free business, Business Standard (BS) reported. There was hardly any registration with the department in the wake of the strike by the jewellers demanding that the government roll back the one per cent excise levy. The strike has now been called off and the jewellers are in a hurry to regain their lost business.

So far, around 35 jewellers, largely organised players who did not participate in the strike, have sought registration. These have been approved and the applicants allocated registration numbers. “Jewellers were on strike till Tuesday. We are committed to approving registration in two days,” said Subhash C Varshney, chief commissioner of central excise (Mumbai zone) to BS. “The industry is very clear. The complications are gone. All parties concerned are positive about the issues concerning the sector. We do not see any complication anymore. Hence, there is no question of going on strike once again. Jewellers would start excise registration now,” said G V Sreedhar, chairman of All India Gems and Jewellery Trade Federation (GJF).

Mohit Kamboj, president of India Bullion and Jewellers Association, reiterated that IBJA would ensure that all demands of jewellers are met by the government, for which the association would soon launch a help line.“Any jewellers harassed by the excise department can call on that number and would take up their issue immediately.” said Kamboj to BS. The government has extended the time limit for jewellery establishments to register with the central excise department, while simultaneously asking them to settle the excise dues for the March-May period along with that of June, 2016 by July1, 2016. The jewellers, central board of excise and customs said, are liable to pay excise duty with effect from March 1, 2016.

Despite of extension, jewellers are still confused as to how and when? Surana explains, “The extension granted for registration up to 1 July 2016 and extension for payment of duty for the months of March, 2016 to May, 2016 along with liability for the month of June, 2016 needs to be properly notified and published in official gazette as against mere issuance of circular.”

FinMin sets up sub-panel for excise duty row

The finance ministry has constituted a sub-committee under the already functioning Ashok Lahiri panel to interact with the trade and industry on the imposition of central excise duty on jewellery. The committee will comprise Gautam Ray, a former tax official in the finance ministry; Rohan Shah, a legal expert; Manoj Kumar Dwivedi, a joint secretary in the department of commerce; and Alok Shukla, a joint secretary in the tax research unit in the Central Board of Excise and Customs, an official statement said.

Representatives from the trade will be appointed to the sub-committee shortly. The committee will consider all issues related to compliance procedure for excise duty, records to be maintained, operating procedures, and all other relevant issues. “All associations, trade and industry will be given an opportunity to submit their representations before the sub-committee in writing. All India associations will also be given an opportunity to state their case in person,” said the statement.

As jewellers try to come to consensus with excise duty, Central Board of Excise & Customs (CBEC) needs to clarify all the issues/concerns at earliest so that industry can change their processes and have systems in place. “The key areas such as clarity over valuation in case of part goods supplied by customers, clarity over term ‘job work’, amending laws to crystallize excise duty at the time of sale as against removal from factory or workshop, clarity over acceptance of weight wise stock register as against item wise stock register etc. needs to be addressed as it will go long way for industry to bite the bullet,” adds Surana.

Negotiations on excise duty to continue

In a recent development in excise duty row, Justice M Duraiswamy of Madras High Court ordered status quo on the issue of 1 per cent excise duty on non-silver jewellery till June 3. The court granted the interim relief to the jewellers on a petition filed by Coimbatore Jewellery Manufacturers Association seeking to quash the notification of central excise dated March 1. The association had moved the court requesting it to direct the Centre not to enforce the central excise duty on gold jewellery.

It’s still not over for the disgruntled jewellers! Associations have stated that they will continue to negotiate with government. Members from different associations across India have drafted their demands and nominated people to talk with central government on behalf of jewellers.