Budget 2012: A blow to golden glow
Chair, All India Gems and Jewellery Trade Federation
THE BUDGET 2012 has removed all the shine on the gems and jewellery sector. Pranab Mukherjee has singled out the jewellery sector for a barrage of provisions that is set to hamper its the functioning.
Customs duty has been quadrupled in one month. Excise duty has been imposed on the entire sector and caused a huge uproar. Cash transactions over Rs 2 lakh need to be deducted for tax at source. The sector is unable to comprehend such drastic measures imposed. Being singled out for such harsh, un-implementable and unreasonable provisions has made jewellers across the country react with a call for a nationwide bandh.
Gold is an intrinsic part of the Indian culture. Then why is the govt killing the trade?
In the widest protest ever, the traders are strongly reacting to what they call ‘making jewellers commit suicides’. Why is the government killing the trade? Jewellery is an art, an intrinsic part of the Indian culture. With rising prices of precious metals and gems it has already shrunk in quantity. Why is there more efforts to reduce consumption when an average citizen considers jewellery as a way to social security?
Reasons given by the finance minister is that valuable foreign exchange is being used to import gold. In actuality, gold consumption has reduced by 25 per cent in past 12 months. Therefore the imports are actually being used by etfs and other speculative sectors where institutions park funds in crores of rupees. Listed below are the issues , their problems and the respective solutions:
Issue 1: Proposed central excise duty
Problem: Central excise duty is a detailed law and needs elaborate book keeping. The costs and details to be maintained are cumbersome. Ordinary jewellers will be subject to great hardship as they are family owned small businesses. The harassment by the officials of the Central excise department will subject jewellers to mental disturbance. This will lead to jewellers resorting to leaving their business or not declaring business in their books out of fear. This is like going back to the past where jewellers were troubled by Inspector Raj.
Solution: Abolish excise duty on jewellery altogether. Also as the customs duty has already been quadrupled from 1-4 per cent, there is ample gain of revenue for government.
Issue 2: Provision to tax large jewellery purchases at selling point. All transactions over Rs 2 lakh done in the retail shops now need to charge 1 per cent extra.
Problem: This provision is impractical as customers will force the jewellers to under-invoice or he will go to another jeweller who is willing to take the risk and sell without invoice. This would will force the business to go underground and encourage parallel economy. Further the states will lose VAT also, treat all industries at par. Jewellery industry must not be subjected to step motherly treatment. Today, a mere Rs 2 lakh cannot even buy 60 grams of gold jewellery at the present rate
Solution: Abolish or roll back this provision fully.
Issue 3: An increase in import duty from 1-4 per cent.
Problem: Adding another 1 per cent VAT makes gold costlier in India by 5 per cent in comparison to the neighbouring countries This is a huge difference which has led to the fear of smuggling. The government wants to abolish illegal transactions, money laundering and black money but eventually, this increase of duty will render smuggling rampant.
Solution: With the present gold rates we feel 2 per cent is reasonable levy.
Lastly, it is vital to know what the government really intends for this sector. The gold industry employs more than two crore people including goldsmiths and artisans. The skilled craftsmen and women hail from lower socio-economic groups. The products they manufacture form the backbone of Indian culture. Does the government wish to destroy the culture and craftsmanship of India?
The opinions expressed are the author’s own