Bachhraj Bamalwa, Chairman of the All India Gems & Jewellery Trade Federation (GJF), the apex body of the jewelry retail industry in India, today (Thursday) said at a press conference that retailers were unwilling to even consider any alternatives.

 

 “We are not willing to consider any alternative – only a complete rollback will do,” he said.

 

The GJF and the Finance Minister are scheduled to meet for talks tomorrow (Friday) to try to resolve the issue.

 

Bamalwa said that a protest rally is planned in Mumbai on April 7 and another in Delhi on April 11. Millions of goldsmiths, artisans and jewelry retailers in 400 cities in 25 states across the country have been protesting and striking against the government move for the past 20 days. According to the GJF, local gem and jewelry bodies had been doling out money and rations to striking artisans, who have lost their means of sustenance due to the strike.

 

Bamalwa explained that the industry was not protesting the payment of the 1 percent tax – which the GJF said would net the government a mere $29.45- to 39.23 million (Rs.1.5- to 2 billion) from an industry that has an estimated annual worth of $58.85 billion (Rs. 3 trillion). “We’re saying that compliance with excise duty regulations, which require the tax to be added to the value of the product the moment it leaves a workshop, is impossible.”

 

Bamalwa explained that 97 percent of the jewelry made for sale in India was handcrafted by some 20 million small-scale goldsmiths and artisans. The jewelry usually made trips to a variety of shops with a variety of specialties – stamping, polishing etc. Apart from the high cost of the material, the only added value was a relatively modest labor charge. How, he asked, would these small-scale artisans keep track of value added or total cost during the whole process?

 

According to the GJF, the strike has so far cost the industry an estimated $3.9 billion (Rs. 20 billion) and the government has lost revenues of between $137.3- and $196.2 million (Rs. 7- to 10 billion).

 

The GJF and other industry organizations have been protesting three proposed government measures – the imposition of the 1 percent excise, the doubling of the import duty on gold from 2- to 4 percent, and the government ordering the collection of 1 percent income tax from retailers, on the sale of jewelry worth more than $3,917 (Rs.200,000).

 

On the doubling of import duty on gold, Bamalwa said, the fear was that this would lead to large-scale smuggling, while the requirement to collect 1 percent income tax would simply generate a large number of un-invoiced transactions. “Consumers will ask retailers not to invoice the purchase and he dare not refuse as the consumer can simply go to someone else who will,” Bamalwa explained.

 

Jewelers are open to negotiation on the latter two issues, Bamalwa noted.

 

According to Ashok Minawala, a past Chairman of the GJF, the government had imposed excise duty on branded jewelry in 2005. The actual notification, however, had brought even branded jewelry under ambit of the new rule. Retailers got together and the GJF was born. It successfully disputed the rule and the government subsequently made it clear that only branded jewelry would be liable for the tax.

 

In 2008, government abolished excise duty on jewelry altogether. In 2011, government re-introduced the tax. This time, the notification said that if the jewelry was sold or delivered in a box or pouch with the retailer’s name or logo on it, it would be considered “branded.” Even the “house marks” – imprints that retailers put on their jewelry to help identify it when a consumer seeks a buy-back – would “brand” the jewelry.

 

“The GJF protested this for a full year and on March 2, the Finance Minister announced that ‘house marks’ and boxes and pouches with retailer logos would not be considered to “brand” the jewelry,” Minawala explained, adding, “However, on March 16, his new budget proposals brought all jewelry – branded and unbranded – under the ambit of excise duty.”

 

Bamalwa observed, “The government says it wants to bring the entire country under a unified General Services Tax (GST) regime. We are willing to come under a GST system this very instant. And our argument is that if the government wants to do that, why is it implementing this excise duty ruling?”

 

Minawala explained that in the past year, while the GJF battled the excise duty ruling, over 100 unbranded jewelry retailers had been raided across the country. “If a ruling that was meant to be for only the branded sector could do this, imagine what would happen if the entire industry was brought under the ambit of excise duty,” he exclaimed.

 

While Bamalwa said that the Gem & Jewellery Export Promotion Council (GJEPC) had supported the agitation and was prepared to stop exports if the excise duty proposal was not rolled back, the GJEPC told IDEX Online that this was not so and that it would be issuing a written denial.