It all began on 29 Feb 2016, when the Indian government proposed a 1% excise levy on gold jewellery in the Union Budget 2016. The Indian jewellery sector was up in arms, and the India Bullion and Jewellers Association (IBJA) called for a nationwide bandh from March 1st, 2016, prompting jewellers across the country to go on indefinite strike. But after 21 days of indefinite strike the excise duty was rolled back. (Interestingly, the excise duty was in the past as well introduced by the earlier government in year 2012.)
The aftermath is threatening to hit the jewellery industry hard as jewellery companies’ shares plunge after the government proposed the 1% excise duty, but losses to the industry have mounted to $ mn in the past more than a month. The artisans, who have been retrenched or left without any work have reportedly gone to their native villages.
Jewellers across the country held a massive ‘strike’ and protested against the 1% levy as well as the mandatory PAN cards for any transactions above $3,065. Jewellery stores remained closed in most cities in India even till date.
With India Bullion & Jewellers Association (IBJA) and All India Gem and Jewellery Trade Federation (GJF) joining force, the strike was intensified. Meetings were held with Finance Minister Arun Jaitley, but of no avail. Submitting their representation to Prime Minister Modi did not bring any solace to the jewellers as well. The stalemate continued and with the Indian government being firm on not rolling back the levy, the jewellers too did not want to buckle under the pressure.
Soon chaos and frustration set in and the trade organizations could not see eye to eye. Each of them had their own agenda and went about the task of convincing the government.
According to the jewellers, they cannot comply with the requirements as proposed under the Excise Act, as manufacturers are in no position to follow up with the minimum provisions applicable.
To ease the situation, the Arun Jetley clarified that only jewellers with $1.80 mn and more turnover will be liable to pay 1% excise duty on non-silver jewellery items. But, traders were not in the mood to accept any offer other than a roll back of the 1%. So, the strike continued, and the confusion and differences among trade organisations and even different Indian States, did little help to solve the issue.
Meanwhile, GV Sreedhar, Chairman, GJF, reiterated that the jewellery association representatives from all States had unanimously decided to continue the strike till further notice. He stressed that the levy would negatively impact a huge number of manufacturers and craftsmen all over the country. He also said that the excise guidelines were not implementable, and will be detrimental to the survival of the industry.
Sreedhar also urged the Government to have a proper discussion and dialogue with the industry before imposing excise duty. As the Union Finance Minister Arun Jaitley had expressed concern over huge gold imports leading to current account deficit, Indian jewellers also agreed to sell only jewellery and stop selling bullion.
The Gems and Jewellery Export Promotion Council also did its bit by pointing out that the ‘strike by jewellers would affect the whole gem and jewellery industry adversely.’ According to media reports, after 21 days major associations called off the stir.
April in India is a month of festivals like Gudi Padwa and Akshaya Tritiya is celebrated with buying gold and precious jewellery. This year, the strike will hit sales on these festival days. Normally, this is the period when jewellers start stocking up, which will be badly affected this time.
Will the online jewellers in India take this as an opportunity to push sales as most of the stores are closed? Not really, as online jewellery purchases are still to pick up in a traditional market like India. If at all sales are seen in online jewellery portals, it is the entry level pieces that sell and not the high end jewellery, where profit is substantial.
With no solutions in the horizon to the 1% levy issue, the jewellery sector in India may lose much more than they bargained, unless the Indian government relents and eases the situation and end the strike.
Aruna Gaitonde, Editor-in-Chief of Asian Bureau, Rough & Polished
