Indian Jewellers Now on Government's Radar

The Indian jewellery industry that witnessed a prolonged strike of about 42 days recently to force government withdraw 1% excise duty imposed on plain gold and studded jewellery is at present passing through a bad phase. Instead of gaining any concrete benefit from the government, the industry has incurred heavy losses in form of revenue and workforce.

As the sector is highly unorganized here, it is very difficult to assess the exact loss of revenue incurred by it during the strike period but according to an estimate, the striking jewelers have lost a business of about INR 100,000 crore.

At the same time, an estimated two-third of skilled workforce in the jewellery sector has left for their hometown or switched to alternative means of livelihood due to the prolonged strike. These workers hail to the country’s Northern and Eastern states. They have left for their hometown in large number. Trade sources say that workers have left from all across the country for their hometown.

More than 200,000 skilled and unskilled workers are employed in Mumbai’s Zaveri Bazaar market alone. Normally, they get salary on weekly basis for the number of days’ worked and additional sum for overtime work they do. But, because of the ongoing strike, they have been facing survival problems as their weekly salary has stopped.

Abrupt departure of the workforce from the industry has badly affected the work in form of pending orders for ensuing wedding and festive seasons. This would affect the jewellery sector badly in the long term. The manufacturers and jewellery shop owners spend thousands of rupees for their training in a professional institute and retain them as loyal employees throughout their lives. But the investment has gone waste as their return to the jewellery industry becomes difficult once they (workforce) move out.

In fact, the duty is in the form of an indirect tax – excise duty. Jewellers need not absorb the burden of it as is the case with other excisable products. So why are the jewellers protesting if they do not have to absorb the incremental tax?

It is suspected that jewellery sector competes with real estate to attract black money. Buying gold is far easier than stacking cash. The industry sources also say that inventory in a jewellers shop and physical gold he holds rarely matches with the tax return of the jeweller, assuming he files it. If a jeweller does not maintain his accounts, it can be assumed that filing a tax return would also be a difficult tax.

By paying the excise duty, it would mean that the jewellers and their business practices are on the government’s radar. Excise duty paid will have to tally with the income generated by the jeweller, including those that are transacted in cash and on purchases made in cash. This simply means that all previous cash purchases would come to light and the jeweller shall have to disclose his source of money for buying these gold and jewelleries.

Opening up of previous transactions is what the jewellers really fear. Unaccounted money for purchases is the real issue here.

The Government is really not ‘killing’ the jewellery industry as alleged by some people. Finance Minister Mr. Arun Jaitley describes the levy as an attempt towards the preparation for the Goods and Services Tax (GST). It is also a step to curb “black money” in the system, according to him. Why should jewelers be afraid of any excise inspector if they keep their books clean?