India's $35 billion jewellery industry, trading in 1,000 tonnes of gold a year, came to a standstill Tuesday. All India Gems and Jewellery Trade Federation (GJF), one of the rallying organisations for gold jewellery manufacturers, wholesalers and retailers gave a call to shutter down until Saturday, March 5.
"A pan-India three-day strike has the potential to cost the Indian economy to the tune of 4 tonnes of gold per day ($432 million)," GJF's Zonal Chairman Anantha Padmanaban told International Business Times, India, on the stalemate.
Earlier in the year, in a pre-budget announcement, the government had stipulated producing Personal Account Number/Card (PAN) to every gold jewellery worth Rs 2 lakh and above as mandatory. Even as this was being contested â€” 86 percent of the population do not have a PAN card â€” by the jewellers' associations, the Budget Monday levied an unexpected excise duty on jewellers.
The announcement of one percent excise duty on gold and diamond jewellery for jewellers who do not avail input tax credit (or 12.5 percent for those who avail input tax credit) had in one sweep brought most manufacturers into the excise department's tax net. Also the exemption limit of Rs 6 crore (worth of gold transaction per year) meant many small manufacturers now are subject to the new excise tax.
Padmanaban explained how the Indian jewellery industry is still an unorganised sector with 70 percent business accruing from small manufacturers. "To have these semi-literate, single-owned, small enterprises to maintain a new tax record, and to deal with a department of astute taxmen could be harking back to the hoary days of Inspector Raj," he added.
GJF claimed on its website that the PAN imposition had already eaten into their business by 25 percent. And hurt the livelihood of an industry that employs 6 crore people. It said that allowing a government department to intervene at this juncture was uncalled for.
The budget speech on its part promptly mentioned that a simplified compliance procedure would be established.