Gold traders' associations want 2% excise duty off

Jewellery associations from across the country and the World Gold Council (WGC) have come together against the Union Budget's 2 per cent excise duty on branded jewellery and job work.

The associations and WGC have made representations to the finance minister to clearly define 'branded jewellery' and to impose duty on the bullion trade itself and not at the retail end.

"The term 'branded jewellery' has to be defined clearly from the excise point of view. Right now there is confusion among traders and tax collection departments," said K Shivram, vice-president, World Gold Council.

The gold jewellery trade is a low margin one. So a 2 per cent excise duty can destroy small traders and upcoming brands. It is only the established jewellery brands, which operate on large margins, that can absorb or pass on the duty to customers, he added.

Imposition of the duty on branded jewellery and job work in the 2005 Budget has led to a dip in trade. Gold trade had picked up due various factors like the growth in rural economy, increased disposal incomes in the hands of urban consumers and large design churn-out by jewellers.

Allaying fears that the value added tax (VAT) rollout in the country will cause gold jewellery prices to shoot up, Shivram said, "Jewellers are upbeat over VAT as under it the tax burden on consumers will come down drastically to 1 per cent, making gold an attractive buy. Currently different states have different tax rates."

With more gold jewellery companies and traders opting for voluntary hallmarking, the highly fragmented trade is slowly getting organised.

Hallmarking is the accurate determination and official recording of the proportionate content of precious metal in gold. Hallmarks are also used in many countries as a guarantee of purity or fineness of gold jewellery.

"A few years ago there were only a few or no hallmarking centres, but now there are 18 centres in the country of which nine are in south India," said Shivram.

The Indian gold jewellery industry, estimated at Rs 60,000 crore, is witnessing an annual growth of 15-17 per cent.

The World Gold Council, in association with 'The Art of Jewellery" magazine, plans to hold a 50-day 'Karnataka Gold Festival' from April 4 to May 25. About 500 jewellers spread across the state and supported by jewellery associations of Karnataka are taking part.

"Based on the success of the Bangalore Gold Festival of 2004 in which 1.6 tonnes of gold were sold, we plan to take it statewide," said Sumesh Wadhera, the event organiser and editor of 'The Art of Jewellery'.

For the event, singer and actress Vasundhara Das has been roped in as the brand ambassador and a prize money of 5 kg gold will be distributed through 246 lucky draws to be held during the festival.

"The event is likely to witness the launch of gold jewellery of both contemporary and traditional designs," said Shivram.