Cash transaction limit to hit rural jewellery business
By Chaitanya Muppala | February 02, 2017
Govt also ignored industry's proposal to cut import duty on gold from abnormally high level of 10%
The gems and jewellery industry in India is disappointed with the Union Budget presented on Wednesday. While the government ignored the industry's proposal to cut import duty on gold from the abnormally high level of 10 per cent to make the effective duty levy of 13 per cent, the Finance Minister Arun Jaitley imposed an upper limit on cash transactions at Rs 300,000.
Earlier, there was no such restriction on cash transactions earlier. But, jewellers were asked to charge 1 per cent of tax collection at source (TCS) for cash transactions above Rs 500,000. But, all transactions above Rs 200,000 would continue to call for know your customer (KYC) details including permanent account number (PAN).
“Since the cash transaction is capped at Rs 300,000, we need to change our spending habits to become more digital with jewellery purchase above this threshold. So, the finance minister’s proposal is negative for the gems and jewellery sector,” said Nitin Khandelwal, Chairman, All India Gems & Jewellery Trade Federation (GJF).
The decision would affect jewellery sales immensely in rural areas with customers having no cheque facility or digital compliant. Rural sales contribute significantly to India’s jewellery sector.
The government also imposed 12.5 per cent countervailing duty (CVD) on silver coins, medallions must have silver content not below 99.9 per cent, semi manufactured form of silver and articles thereof. With this, the overall applicable duty has risen to 30 per cent from the existing 17.5 per cent (15 per cent customs duty and 2.5 per cent of education cess).
For waste and scrap of precious metals or metals clad with precious metals arising in course by manufacturing of goods, strips, wires, sheets, plates and foils of silver, articles of silver jewellery, other than those studded with diamond, ruby, emerald or sapphire and silver coin of purity 99.9% and above, bearing a brand name when manufactured from silver on which appropriate duty of customs or excise has been paid, the government has proposed a condition to claim “nil” duty levy. The condition emphasises that no credit of duty paid on inputs or input services or capital goods has been availed by manufacturer of such goods.