Import and excise duty hiked on jewellery

By TIOL News Service

NEW DELHI, MAR 16, 2012: THE jewellery sector hoping for some incentives in Budget 2012 may have to take on additional burden.

The government, to prevent round-tripping, has proposed to impose basic customs duty of two per cent on cut and polished, coloured gem stones, at par with diamonds. This is expected to raise import costs of coloured gem stones into the country, leading to jewellery price escalation.

The government has also further sought to bring bullion and jewellery retailers under the ambit of section 206C and make them responsible to deduct tax at the rate of one per cent, from the sale consideration of bullion or jewellery, when the sale consideration exceeded two hundred thousand rupees.

This section was originally introduced to combat large scale tax evasion by persons who take up contracts for goods whereby a certain percentage of the sale consideration is deemed to be the profit and gains of business. Accordingly, sub sections 2, 3, and 9 of section 206C, which are consequential in nature would also be amended.The explanation to this section would also be amended to provide the meaning of 'buyer' with respect to sub-section 1 and sub section 1D and the meaning of jewellery.

The Budget 2012 also seeks to impose an excise duty of one per cent without CENVAT credit facility on all articles of jewellery other than silver jewellery which is now being fully exempted. Such duty would have to be paid on tariff value which is being fixed at 30 per cent of the transaction value as declared in the invoice.

The rate of excise duty is also being increased on the DTA [Domestic Tariff Area] clearances of plain gold jewellery manufactured by an EOU (Export Oriented Units) from 5 per cent ad-valorem to 10 per cent ad valorem.