India Repeals Jewelry Excise Duty

Indian jewelry manufacturers and retailers gave up business worth more than 200 billion rupees, or $3.72 billion at current exchange, in a 21-day protest.

NEW DELHI — Could a 1 percent excise duty make so much difference?

Indian jewelry manufacturers and retailers gave up business worth more than 200 billion rupees, or $3.72 billion at current exchange, in a 21-day protest against the government’s ruling in March that levied a 1 percent excise tax on branded and unbranded jewelry as a part of the budget for 2012-13.

The protest ended on April 6 after the finance minister promised to take another look at the matter.

While analysts labeled them overly optimistic at assuming that something would really come out of this promise, jewelers lobbied their local politicians and jewelry associations rallied their members at the local and national level.

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Bowing to the pressure, finance minister Pranab Mukherjee last week unveiled plans to roll back the excise duty. Now, despite the losses suffered so far, jewelers are lobbying to take a united stand to offer the first 25 percent discount on the fees they charge to make a jewelry piece for a period of 10 days — starting this week.

The matter of the 1 percent excise duty had serious and long-term consequences, according to jewelers.

“We are delighted that the government understood our problems. Had this excise duty not been rolled back, many small and medium jewelers and artisans would have gradually shut down. In the next four to five years, the impact would have been severe,” said Bachhraj Bamalwa, chairman of the All India Gems and  Jewellery Trade Federation.

While it still must be determined what will happen to the duties collection between March 16 and May 7, the withdrawal will be effective from March 17. Meanwhile, the government lost out with the 21-day strike as well, having been forced to give up on 7 billion rupees, or $130.2 million, in tax collection in this period.

“This is the right time to encourage the sector and to develop the brands, which after being established in the domestic market can also be exported,” said Rajiv Jain, chairman of the Gem and Jewellery Export Promotion Council, appreciating the move to roll back the duty, which he said would help the sector to grow.

Total gem and jewelry industry exports were $42.83 billion in the fiscal year ended March 31, compared with $42.99 billion in fiscal 2011. The gem and jewelry sector accounted for 14 percent of India’s total merchandise exports in the last financial year.

Gold jewelry has seen an increase of 30 percent in exports, from $12.69 billion in 2010-11 to $16.51 billion in 2011-2012. There was a 17.3 percent decline in the export of cut and polished diamonds, with exports decreasing from $28.21 billion in 2010-11 to $23.32 billion in 2011-12.

Meanwhile, colored gemstones saw growth of 9.1 percent in dollar terms, from $314.20 million in 2010-11 to $342.80 million in 2011-12.