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Saturday, 07 May 2016 00:00
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BJP sticks to its guns, now to ensure no harassment


Given the widespread use of cash in the jewellery sector, the bulk of which is not reported to the taxman, it is not surprising that the finance minister Arun Jaitleyhas stuck to his Budget proposal of levying a 1% excise duty on jewellery except for that made out of silver—in case input tax credit is availed of, the excise duty is to be 12.5%. Jaitley has stood his ground despite the industry going on strike for so long and the fact that the powerful industry has ensured this was rolled back in the past—in 2012, the UPA imposed a similar levy to get a handle on black money but it was rolled back after Congress president Sonia Gandhi intervened. As Jaitley said in Parliament during the passage of the Finance Bill, it was immoral to tax other items when a luxury item like jewellery was kept out of the tax net—doing so also ensures that when the GST comes into effect, the jewellery sector will be part of it. Also, if various states levy a VAT—Kerala has a 5% VAT rate—surely a 1% rate is all right since, in any case, there are books of accounts that have to be maintained and there are inspectors involved.

The larger concern, however, is not the tax rate, it is the likelihood of harassment by tax officials in a sector that is largely unorganized and where disputes over valuation are almost certain to be endemic, and therefore a source of corruption. While the R12 crore annual turnover limit below which the excise duty shall not apply will ensure the smaller jewellers are out of the net, the finance minister has clarified that no excise officer will visit any artisan or jeweller. An expert panel headed by former chief economic advisor Ashok Lahiri has been set up to lay out the manner in which this tax is to be administered and how records are to be maintained and forms filled. It is absolutely critical that the finance minister deliver on this promise since, while it is true that a lot of black money is channelised into this sector and needs to be tackled, a large part of the savings of the lower-middle and middle classes are also in the form of gold jewellery—as such, if the taxman is not careful, it could blow up in the government’s face.


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