Artisans who manufacture jewellery for others on job-work basis need not obtain registration
The Central Board of Excise and Customs (CBEC) on Tuesday sought to clarify the budget proposal related to the levy of excise duty of one per cent on precious metal jewellery as it felt that the ‘full import' of the provisions contained in the legislation “are not clear to the trade.”
Explaining the rationale of the proposed legislation, an official statement here said that in the budget for 2011-12, full exemption from the Central excise duty was withdrawn on 130 items, which were being charged to State VAT (value added tax) in a bid to signal movement towards the Goods and Services Tax (GST).
As part of this proposal, with effect from March 1, 2011, the government levied an excise duty of one per cent on precious metal jewellery, but only on those goods which were manufactured or sold under a brand name. This rate was applicable if no Cenvat credit of duty paid on inputs or input services was taken. However, there have been disputes over the interpretation of the term ‘branded' jewellery as, unlike other goods, the brand name is not always affixed on the jewellery items themselves.
In its bid to streamline the excise impost, the scope of the levy has been altered to include branded and unbranded jewellery under its ambit even as several provisions have been incorporated to render the levy simple in its operation and keep small artisans and goldsmiths outside its purview.
Detailing some of the major provisions incorporated in the legislation, the statement noted that the duty is chargeable on a tariff value equal to 30 per cent of the ‘transaction value' declared on the invoice and not on the full value of the transaction, except where the retail customer provides the gold or old ornaments for remaking. At current prices of gold at about Rs.27,000 per 10 grams, the duty payable works out to a nominal amount of about Rs.84 per 10 grams.
Also, recognising that most jewellers get their gold articles manufactured on job-work from small artisans and goldsmiths, the responsibility of registering with Central excise authorities and paying the duty has been assigned to the ‘principal' manufacturer, who gets the goods manufactured.
In effect, those artisans or goldsmiths who only manufacture jewellery for others on a job-work basis need not obtain registration.
Besides, even if artisans and goldsmiths manufacture and sell jewellery themselves, the benefit of small-scale exemption is available to them and for this purpose, the aggregate value of clearances would be computed on the basis of tariff value, that is, 30 per cent of the transaction value. Small-scale exemption is available to any manufacturer whose annual turnover in the previous year did not exceed Rs.4 crore and full exemption from duty is available to such manufacturers for an annual turnover of Rs.1.50 crore in the current year.
Thus, taking the average price of gold at Rs.27,000 per 10 grams, the exemption implies that those who manufactured up to 49 kg of jewellery in the previous year would be exempt from duty for clearances of 18.5 kg of gold this year. As a result, most of the small artisans and goldsmiths would remain exempt from the levy, the CBEC said.
As for silver, full exemption from excise duty has been provided to branded items implying thereby that silver jewellery, whether branded or unbranded, is fully exempt from excise duty.
Allaying bullion trade's apprehension that the levy would result in ‘Inspector raj', the CBEC recalled that the government has already prescribed a simple one-page quarterly return that can be filed electronically by all units manufacturing excisable goods under scheme. Since gold jewellery is leviable to state VAT, these units are already maintaining records/accounts for that purpose and no separate records have been prescribed under Central Excise law.