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.
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:
S. No.:
|
Value
of Clearances
|
Rate of
Duty
|
1.
|
First
clearances of the articles of jewellery for home consumption, 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 upto an aggregate value not exceeding six
crore rupees made on or after the 1st day of April in any financial year,
from the whole of the duty of excise specified thereon in the First Schedule
:
Provided
that during the period starting from 1st March, 2016 and ending on 31st
March, 2016, the exemption shall apply to the first clearances of the
articles of jewellery for home consumption, 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, up to an aggregate value not exceeding fifty lakh rupees.
|
Nil
|
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.
Also Read- Guide to Excise Duty Levy on
Jewellery under Budget 2016: Part-1
Compiled by Team KGMA under the aegis of CA Kamal
Garg. For any queries and suggestions approach at cakamalgarg@gmail.com,
llp.kgma@gmail.com, admin@kgma.in
[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
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