Header Ads

Clarifications on levy imposed on jewellery



Clarifications on levy imposed on jewellery
In this year’s Budget, 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.


            Some doubts have been expressed by the trade and industry regarding this levy. In that context, salient features of this levy are explained as under:

·         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.
·         The central excise officers have been directed not to visit the premises of Jewellery manufacturers.
·         Articles of silver jewellery [other than those studded with diamonds, ruby, emerald or sapphire] are exempt from this duty.
·         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].
·         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.
·         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.
·         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/].
·         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.
·         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.
·         A simplified quarterly return has also been prescribed, for duty paying jewelers [ER-8].
·         Moreover, simplified export procedure is available for exempted units [Part III of chapter 7 of CBEC’s Central Excise Manual].



*****
Government to Issue Third Tranche of Sovereign Gold Bonds
The Government of India, in consultation with the Reserve Bank of India, has decided to issue third tranche of Sovereign Gold Bonds. Applications for the bond will be accepted from March 8, 2016 to March 14, 2016. The Bonds will be issued on March 29, 2016. The Bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL) and designated post offices. The borrowing through issuance of the Bond will form part of market borrowing programme of the Government of India.

It may be recalled that Honourable Finance Minister had announced in Union Budget 2015-16 about developing a financial asset, Sovereign Gold Bond, as an alternative to purchasing metal gold. Accordingly, two tranches of issuances have been undertaken during 2015-16 so far. The features of the Bond are given below:

Sl. No
Item
Details
1
Product name
Sovereign Gold Bond 2016 – Series II
2
Issuance
To be issued by Reserve Bank India on behalf of the Government of India.
3
Eligibility
The Bonds will be restricted for sale to resident Indian entities including individuals, HUFs, Trusts, Universities and charitable institutions.
4
Denomination
The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.
5
Tenor
The tenor of the Bond will be for a period of 8 years with exit option from 5th year to be exercised on the interest payment dates.
6
Minimum size
Minimum permissible investment will be 2 units (i.e. 2 grams of gold).
7
Maximum limit
The maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March). A self-declaration to this effect will be obtained.
8
Joint holder
In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only.
9
Frequency
The Bonds will be issued in tranches. Each tranche will be kept open for a period to be notified. The issuance date will also be specified in the notification.
10
Issue price
Price of Bond will be fixed in Indian Rupees on the basis of the previous week’s (Monday–Friday) simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Ltd. (IBJA).
11
Payment option
Payment for the Bonds will be through cash payment (upto a maximum of Rs. 20,000/-) or demand draft or cheque or electronic banking.
12
Issuance form
Government of India Stock under GS Act, 2006. The investors will be issued a Holding Certificate. The Bonds are eligible for conversion into demat form.
13
Redemption price
The redemption price will be in Indian Rupees based on previous week’s (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA.
14
Sales channel
Bonds will be sold through banks, SCHIL and designated Post Offices, as may be notified, either directly or through agents.
15
Interest rate
The investors will be compensated at a fixed rate of 2.75 per cent per annum payable semi-annually on the initial value of investment.
16
Collateral
Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.
17
KYC Documentation
Know-your-customer (KYC) norms will be the same as that for purchase of physical gold. KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport will be required.
18
Tax treatment
The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961) and the capital gains tax shall also remain same as in the case of physical gold.
19
Tradability
Bonds will be tradable on exchanges/NDS-OM from a date to be notified by RBI.
20
SLR eligibility
The Bonds will be eligible for Statutory Liquidity Ratio purposes.
21
Commission
Commission for distribution of the bond shall be paid at the rate of 1% of the subscription amount.


*****

Third Tranche of the Sovereign Gold Bond Scheme to remain open from 8th March 2016 (Tuesday) to 14th March, 2016 (Monday)
The Third Tranche of the Sovereign Gold Bonds will be kept open from 8th March 2016 (Tuesday) to 14th March, 2016 (Monday). The Bonds will be issued on 29th March, 2016. Shri Shaktikanta Das, Secretary, Department of Economic Affairs, Ministry of Finance has held a review meeting with the CMDs of the Banks on 3rd March, 2016 and discussed their preparedness for the third tranche of SGB.

To increase the awareness among depositors, Government is continuing the Media campaign in AIR and FM radio, Print media and through Mobile SMS campaign. Information is also available on the website www.finmin.nic.in/swarnabharat and on the toll free number 18001800000.

Earlier, the Government had launched the Sovereign Gold Bond Scheme on 5th November, 2015. The main objective of the scheme is to reduce the demand for physical gold and shift a part of the gold imported every year for investment purposes, into financial savings through Gold Bonds.

Sovereign Gold Bonds are issued by RBI on behalf of the Government of India on payment of the required amount in rupees and are denominated in grams of gold. The Bonds are restricted for sale to resident Indian entities including individuals, HUFs, trusts, Universities, charitable institutions. Minimum permissible investment is 2 grams of gold to be paid in rupees. The maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March). Government has fixed the rate of interest for the year 2015-16 as 2.75 % per annum , payable on a half yearly basis. The bonds are available in both in demat and paper form. The rate for the Bonds is fixed on the basis of simple average of closing price for gold of 999 purity of the previous week published by the India Bullion and Jewellers Association (IBJA). These bonds will be available at Banks , Post Offices and SHCIL . The tenor of the Bond is for a period of 8 years with exit option from 5th year onwards to be exercised on the interest payment dates. KYC norms are same as that for gold. Exemption from capital gains tax is also available. Long term capital gains arising to any person on transfer of SGB is also eligible for indexation benefits. On maturity, the investor will get the equivalent rupee value of the quantum of gold invested at the then prevailing price of gold.


No comments

Powered by Blogger.