Guide to Excise Duty Levy on Jewellery under Budget 2016

KGMA’s Guide to Excise Duty Levy on Jewellery under Budget 2016[1]

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].

Jewellers get 1 more month to clear excise dues of March; Govt. to form a Committee for excise levy[2]:

As noted above, in the Budget 2016-17, Central Excise duty at the rate of 1% (without input tax credit) and 12.5% (with input tax credit) has been imposed on all articles of jewellery (except for silver jewellery, other than those studded with diamond, ruby, emerald or sapphire). In this regard, it has been decided to constitute a Sub-Committee of the High Level Committee to Interact with Trade & Industry on Tax Laws, chaired by Dr. Ashok Lahiri, which will consist of:

a. three representatives of the trade [to be decided by the Government];

b. one legal expert [to be decided by the Government];

c. officer concerned from the Ministry of Commerce & Industry [MoC&I] to be nominated by the MoC&I; and

d. high level officials from the central excise department to be nominated by the Central Board of Excise and Customs.

The composition of the Sub-Committee will be circulated once the names of its members are finalized.

All associations will be given an opportunity to submit representation before the sub-committee in writing and the all India associations to state their case in person.

Terms of reference of the Sub-Committee will include the issues related to compliance procedure for the excise duty, including records to be maintained, forms to be filled including Form 12AA, operating procedures and any other issued that may be relevant. The Sub-Committee will submit its report within 60 days of its constitution.

Till the recommendations of the Sub-Committee are finalized, the following shall be adhered to:

(a) All payments of central excise duty will be based on first sale invoice value;

(b) The central excise authorities will not challenge the valuation given in the invoice provided the cartage purity and weight of the gold/silver with precious stones; and carats of diamond/precious stones are mentioned on the invoice;

(c) The central excise officers will not visit the manufacturing units/ shops/ place of business/residence of the jewellers;

(d) No arrest or criminal prosecution of any jeweller will be done;

(e) No search or seizure of stocks by any central excise official will be effected;

(f) Exporters will be allowed to export on self declaration and submission of LUT to customs without the need to get LUT ratified by central excise. Prevailing system will continue.

The registration of the establishment with the central excise department can be taken within 60 days from 1st March, 2016. However, the liability for payment of central excise duty will be with effect from 1st March, 2016, and as a special case for the month of March, 2016, the assessee jewellers will be permitted to make payment of excise duty along with the payment of excise duty for the month of April, 2016.

SSI Notification 8/2003 vis-à-vis Excise Duty Liability on Jewellery[3]:

In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944, the Central Government, on being satisfied that it is necessary in the public interest so to do, made the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 8/2003-Central Excise dated the 1st March, 2003:

Other requirements of amended SSI Notification 8/ 2003:

1. the manufacturer of the articles of jewellery other than articles of silver jewellery but inclusive of articles of silver jewellery studded with diamond, ruby, emerald or sapphire, falling under chapter heading 7113 of the First Schedule shall not avail the credit of duty on inputs under rule 3 or rule 11 of the CENVAT rules, paid on inputs used in the manufacture of these goods cleared for home consumption, the aggregate value of first clearances of which, as calculated in the manner specified in the said Table does not exceed six crore rupees;

2. the manufacturer of the articles of jewellery other than articles of silver jewellery but inclusive of articles of silver jewellery studded with diamond, ruby, emerald or sapphire, falling under chapter heading 7113 of the First Schedule also does not utilise the credit on capital goods under rule 3 or rule 11 of the said rules, paid on capital goods, for payment of duty, if any, on the aforesaid clearances, the aggregate value of first clearances of which does not exceed six crore rupees, as calculated in the manner specified in the said Table;

3. the aggregate value of clearances of all excisable goods for home consumption by a manufacturer of the articles of jewellery other than articles of silver jewellery but inclusive of articles of silver jewellery studded with diamond, ruby, emerald or sapphire, falling under chapter heading 7113 of the First Schedule, from one or more factory or premises of production or manufacture, or from a factory or premise of production or manufacture by one or more manufacturers, does not exceed rupees twelve crore in the preceding financial year;

4.“clearances for home consumption”, wherever referred to in this notification, shall include clearances for export to Bhutan.

FAQs on Excise Duty imposed on Jewellery under Budget 2016

Query: Sir my understanding on taxability is:

1) Up to 1.5 crores no need of registration under excise;

2) 5 to 6 crores covered by SSI exemption so registration is required under excise once 1.5 crore reached;

3) 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:

1) when goods are taken as samples;

2) 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.

Query: please clarify whether pre budget jewellery stocks attract excise duty if our preceding financial year sales were more than Rs. 12 crores.

Response: It will attract duty as it was excisable but exempt from duty

Query: Whether SSI Notification 8/2003 is applicable mutatis mutandis for excise levied on jewellery

Response: Yes – SSI exemption applies but the turnover limit is Rs. 6 crores and Rs. 12 crores instead of Rs. 1.5 crores and Rs. 4 crores

Query: On which value excise duty is leviable. Whether excise duty is leviable on Cost of Production or Sales Invoice Value

Response: Excise duty is leviable on clearances made during the financial year and its sale value on which such duty is leviable.

Compiled by Team KGMA under the aegis of CA Kamal Garg. For any queries and suggestions approach at [email protected], [email protected], [email protected]

[1] www.cbec.gov.in, www.taxmann.com

[2] Circular No.1021/9/2016-CX, Dated 21-3-2016

[3] Notification No. 8/2016 – Central Excise

(Author can be reached at [email protected])

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