Proposed Indian Tax on Branded Jewelry Dismays Industry

(IDEX Online News) - While not granting any of the gem and jewelry industry’s requests, the Indian government proposed to reintroduce a 1 percent excise tax on branded jewelry. The jewelry retail fraternity throughout India greeted the finance minister’s announcement with dismay.

At the core of the matter is the broad interpretation of the term ‘branded.’ Tax authorities in the past said it includes ‘house marks’ that Indian retailers put on the jeweler they sell in order to facilitate easy recognition and valuation in case the piece comes in for repair or a buy-back.

The industry asked from the government to add to the budget a presumptive tax instead of the current assessed income tax and a five-year income-tax holiday for the Bharat Diamond Bourse. Neither was granted.

Vinod Hayagriv, chairman of the All-India Gems & Jewellery Trade Federation (GJF), the countrywide body representing the jewelry retail industry, called the decision ill advised. “The reintroduction of the abolished 1 percent excise duty on ‘branded’ jewelry is a retrograde step for the industry. Five years ago, we had made representations to the government and subsequently the excise duty was withdrawn two years ago.

“We do not understand the rationale behind this step,” Hayagriv added. “The gems and jewelry industry is very unhappy and burdened enormously. The entire industry believes that while they are working towards ethical, transparent trade practices, these kind of levies and back-door license raj measures (an Indian term for the excessive bureaucratic interference in business by socialist-oriented governments) will create hardship, litigation and encourage corruption. We urge the finance minister to roll back the 1 percent excise duty on ‘branded’ jewelry.”

Hayagriv went on to say in his statement, “Clearly what the finance minister says on the floor of the house is different from what the Excise Department will interpret this to be. All jewelry with a mark be they house marks, trademarks or brand marks, will be construed as ‘branded’ and each jeweler will need to fight battles in court. The gems and jewelry industry is not an excise duty leviable industry.”

Hayagriv ended with the warning, “The whole country will move to unmarked, unprotected and consumer-unfriendly jewelry production and this will stall the professionalizing of this sector.”