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Stephen Rego

He has been a journalist since the mid-1980s, and has spent close to two decades tracking the gem and jewellery industry while holding different editorial positions in industry specific publications and websites

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One Size Doesn't Fit All

By accepting the Lahiri Sub-Committee recommendations, the government has brought to an end the high-decibel debate related to the levy of excise on the jewellery industry. Does this also amount to indirect acknowledgement of the need for sector-specific policy prescriptions as well?

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Last week the government announced a slew of procedural and administrative measures related to the implementation of the Excise Duty levy on jewellery. Most of these were recommendations of the Lahiri Sub-Committee set up in the wake of the massive all-India jewellers' strike called earlier this year to protest against the original budgetary proposal.

The announcement spelled out compliance procedure for the excise duty, records to be maintained and other relevant administrative issues, and, in effect, has introduced a number of sub-clauses in the systems and rules governing the implementation of the cess while making it applicable to the jewellery industry.

The application of Excise to this sector has been a contentious issue over the last decade or more. Attempts by earlier governments to introduce it had been withdrawn on at least two occasions in the face of huge countrywide protests.

Jewellers had always maintained that they were more than willing to contribute to the national exchequer, but that imposing a levy like Excise would open the door to an 'Inspector Raj' that they claimed would take the country back to the days of the Gold Control Act, spawning a return to corruption, smuggling and other illegal activities.

The latest step by the government has helped work out a via-media of sorts. It clearly says that the excise is payable at the first sale invoice value; that (there will be) no visit to premises of the principal manufacturer [jeweller], except on the basis of specific intelligence and with the approval of Commissioner or equivalent rank officer; and that summons may be issued only with the approval of Commissioner, etc.

More than the details, the proclamation is also remarkable as it indirectly accepts a principle that the gems and jewellery industry has long been voicing - that the procedures and mechanisms which it follows are so vastly different from all other traditional and modern manufacturing industries that general taxes and levies need to be given new forms to make them truly relevant and easily implementable for the sector.

Without formally acknowledging it, the latest government announcement has de facto accepted this approach. For example, the government has announced an increase in the SSI Eligibility limit for manufacturers of articles of jewellery or parts of articles of jewellery or both from Rs. 12 crore to Rs. 15 crore, a limit far higher than the Rs 1.5 crore applicable to other manufacturing industries.

Similarly, no other sector has been declared virtually out of bounds when it comes to routine inspections. But, for jewellers, compliance checks without prior sanction at the higher levels have been clearly ruled out.

Many other such examples can be listed from the various clauses that form part of the government announcement. A key aspect perhaps is the manner in which the Lahiri committee was constituted and went about its work. It comprised government officials, members of trade bodies, an experienced and independent taxation expert with relevant domain knowledge. Industry bodies were asked to make written submissions, and after some discussions, the committee drafted a unanimous report in favour of sector-specific procedures and rules.

The gem and jewellery industry has already put forward several cases for such consideration. These include a benign Income Tax assessment procedure for the diamond industry; provisions for allowing foreign companies to directly sell their rough diamonds through the SNZ in India; a framework for permitting Indian companies to undertake job work in cutting and polishing diamonds for overseas entities; a comprehensive Gold Policy etc.

Will the one size does not fit all principle now be applied to these areas in developing policy prescriptions?

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gold jewellery excise