In Budget 2016, a nominal excise duty of 1% [without input tax credit] and 12.5% [with input tax credit] has been imposed on articles of jewellery. Even for this nominal 1% excise duty, manufacturers are allowed to take credit of input services, which can be utilised for payment of duty on jewellery. The salient features of this levy are explained as under:
(a) Easy compliance with provision for on line application for registration, payment of excise duty and filing of returns, with zero interface with the departmental officers.
(b) The central excise officers have been directed not to visit the premises of Jewellery manufacturers.
(c) Articles of silver jewellery [other than those studded with diamonds, ruby, emerald or sapphire] are exempt from this duty.
(d) An artisan or goldsmith who only manufactures jewellery on job-work basis is not required to register with the Central Excise, pay duty and file returns, as all these obligations will be on the principal manufacturers [Rule 12AA of the Central Excise Rules, 2002].
(e) There is a substantially high Small Scale Industries excise duty exemption limit of Rs. 6 crore in a year [as against normal SSI exemption limit of Rs. 1.5 crore] along with a higher eligibility limit of Rs. 12 crore [as against normal SSI eligibility limit of Rs. 4 crore]. Thus, only if the turnover of a jeweler during preceding financial year was more than Rs. 12 crore, he will be liable to pay the excise duty. Jewelers having turnover below Rs. 12 crore during preceding financial year will be eligible for exemption unto Rs. 6 crore during next financial year. Such small jewelers will be eligible for exemptions upto Rs. 50 lakh for the month of March, 2016. For determination of eligibility for the SSI exemption for the month of March, 2016 or financial year 2016-17, a certificate from a Chartered Accountant, based on the books of accounts for 2014-15 and 2015-16 respectively, would suffice.
(f) Further, facility of Optional Centralized Registration has also been provided. Thus, there is no need for a jewellery manufacturer to take separate registrations for all his premises.
(g) Field formations have been directed to grant hassle free registrations, within two working days of submission of the registration application. Further, there will be no post registration physical verification of the premises [online registration – https://www.aces.gov.in/].
(h) Jeweler’s private records or records for State VAT or records for Bureau of Indian Standards (in the case of hallmarked jewellery) will be accepted for all Central Excise purposes. Also, there is no requirement to file a stock declaration to the jurisdictional central excise authorities.
(i) Excise duty is to be paid on monthly basis and not on each clearance, with first installment of duty payment for the month of March, 2016 to be paid by 31st March for March, 2016.
(j) A simplified quarterly return has also been prescribed, for duty paying jewelers [ER-8].
(k) Moreover, simplified export procedure is available for exempted units [Part III of chapter 7 of CBEC’s Central Excise Manual].
FAQs on Excise Duty imposed on Jewellery under Budget 2016
Query: Sir my understanding on taxability is:
- Up to 1.5 crores no need of registration under excise;
- 5 to 6 crores covered by SSI exemption so registration is required under excise once 1.5 crore reached;
- after 6 crores duty levied on each bill
Is this understanding correct?
Response: Actually registration is required after 6 crores for jewellery and declaration is required after 5.40 crores. Exempted units whose turnover is more than prescribed limit (called ‘specified limit’) have to file a declaration in prescribed form with Assistant Commissioner, Central Excise and obtain a dated acknowledgement. Such declaration has to be filed only once in lifetime of the assessee and not every year. The ‘specified limit’ is defined as Rs 60 lakhs below exemption limit e.g. if exemption limit is Rs 150 lakhs, the ‘specified limit’ is Rs 90 lakhs, i.e. declaration has to be filed by units whose turnover exceeded Rs 90 lakhs. Small units whose turnover is below Rs 90 lakhs (specified limit) per annum, do not have to file any declaration at all – Notification No. 36/2001-CE(NT) dated 26-6-2001 – Board Circular No. 400/33/98-CX dated 9.6.1998.
Query: The excise duty is imposed on jewellery from 01.03.2016 and it has been mentioned that the principal manufacturer has to pay tax if the turnover exceeds 6 crores. Kindly tell the procedure:
- when goods are taken as samples;
- when jewels are taken from one place to other, etc.
how can I prove that my sales are below 6 crores and hence I have not charged excise in bill.
Response: The jewellery business is not similar to normal manufacturing activity – there are lot of issues like job work, resale etc. At present, CBEC has stated that it will accept your accounts which you maintain for State Vat and on that basis you can establish that your turnover is below 6 crores.
Query: What are the registration and duty liability requirements in light of financial year 2015-2016 and Pre Budget Stock.
Response: Only if the turnover of a jeweller during the preceding financial year was more than Rs.12 crores, he will be liable to pay the excise duty. Jewellers having turnover below Rs.12 crore during preceding financial year will be eligible for exemption up to Rs.6 crores during next financial year. Such small jewellers will be eligible for exemptions up to Rs.50 lakhs for the month of March 2016
Query: Whether excise duty on manufacture of jewellery would apply only to new articles.
Response: The tax is on the manufacture. So it would apply on any kind of manufacturing of jewellery, irrespective of whether it is made from fresh or old gold. Thus, the excise duty on manufacture of jewellery would apply not only to new articles but also those that are made by exchanging or melting old jewellery.
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