Parliament on Wednesday accorded its first-stage approval to the Union budget for 2012-13 after Finance Minister Pranab Mukherjee assured the Rajya Sabha that he would have a relook at his proposal to tax unbranded jewellery in the wake of countrywide demands for its rollback, but stood firm on the customs duty hike on gold imports.

In his reply to general discussions on the budget in the upper House, Mr. Mukherjee reiterated his promise — as made in the Lok Sabha on Tuesday — to make appropriate changes with regard to the tax proposal on unbranded jewellery during the debate on the Finance Bill in the second half of the session, but ruled out any reduction in import duty on the precious metal.

“You will have to wait till the Finance Bill [debate after recess] ... we are examining ... but please don't insist on reduction of import duty [on gold]. Import duty reduction is not possible,” he said. Alongside, however, Mr. Mukherjee also agreed to reconsider the proposal on mandatory quoting of PAN (permanent account number) card for purchase of gold jewellery worth over Rs. 2 lakh. The step was intended to curb the flow of black money.

Among all indirect taxes proposed in the budget for the new fiscal, the levy on unbranded jewellery has evoked countrywide protests. While bullion traders and jewellers have downed shutters, members in both House cutting across party lines demanded a rollback. Chief Ministers of various States have also written to the Finance Minister seeking its withdrawal in the light of the plight of gold artisans and small jewellers.

Self-declaration will do

In his bid to pacify the bullion trade, Mr. Mukherjee sought to clarify that there would no scrutiny by tax officials if jewellery traders provided a self-declaration that their turnover was less than Rs. 5 crore. “Self- declaration will be final... no scrutiny,” he said.

No reduction in customs duty

However, the doubling of customs duty on gold and platinum to 4 per cent would stay, Mr. Mukherjee said, arguing that the country could ill-afford to lose foreign exchange on these imports. He pointed out that while gold production in India amounted to a mere two tonnes, the gold import bill stood pegged at $46 billion in April-November 2011, the next highest after crude oil, which accounted for an outgo of $71-72 billion.

Rising tax arrears

On the issue of rising tax arrears, Mr. Mukherjee said two individuals — the late stock exchange broker, Harshad Mehta, and Pune-based stud farm owner Hassan Ali — accounted for 60 per cent of the total. “We are raising revenue [demand] but we are not realising... no visible assets are available… not even a single rupee has been recovered,” he said while noting that the relevant cases had been in courts for a long time.

Mr. Mukherjee's statement on tax arrears was ostensibly in reply to the demand of BJP member and former Law Minister, Ram Jethmalani, that the government must produce all documents and correspondence for agreements with various countries to bring back black money stashed away abroad. He accused the government for not disclosing the names of tax defaulters who had their illegal money stashed away abroad. “The talk of democratic transparency is a myth. You have been talking of this for a long time but have done nothing in this regard… Have some belated sense now. Give names.... Don't say we are trying to recover the tax money. We want to know those tax defaulters,” he said.

Turning to the controversial issue of CST (Central sales tax) compensation to States, Mr. Mukherjee said he had received a communication from the Chairman of the Empowered Committee of State Finance Ministers and the problem would be sorted out as he had an “open mind” on the issue. “Our effort is to build healthy relationship with States... I have not closed the issue... I will look into it.”

The Finance Minister also indicated that while most of the States were revenue surplus, there were a few debt-ridden States and the Centre was looking into their problem. For the three debt-stressed States — Kerala, Punjab and West Bengal — Mr. Mukherjee said a committee was appointed to look into the issue and appropriate decisions would be taken by the 14th Finance Commission.

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