Comment: Rajiv Jain

The domestic gold and silver jewellery industry will be badly hit due to the government’s decision to bring it under excise duty net. But, exports are unlikely to be impacted.

Finance Minister Pranab Mukharjee in the Union Budget 2011-12 levied one per cent excise duty on branded jewellery and branded articles of precious metals which was growing rapidly despite high raw materials prices. Although, the duty levy is just one per cent, yet the government’s initiative to bring all branded jewellery sales under excise duty cover will be a big blow for the domestic jewellery sales. Customers will have to bear additional duty burden as jewellers tend to pass all such levies on to them.

Since, prices of precious metals are already ruling high any additional such duty may divert customers to other substitutes or consumers may tend to opt for cost-effective jewellery items.

We had asked the government to levy presumptive tax in place of income tax in our pre-budget recommendations, which remained untouched. But, I am happy the government had focused on agriculture, which will have a repercussion on the jewellery sector. Also in the long-run, rural economic growth is commonly passed on to the jewellery sector. Since, long-term rural investors prefer jewellery items with any surplus money they have after food, clothing and dwelling, I am confident the branded jewellery industry in domestic market will reap benefit in the future. The branded jewellery industry will, though, continue to suffer as tax net could get wider in the years to come.

Rajiv Jain
Chairman, GJEPC