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Union budget 2016-17 has introduced levy of excise duty on making of jewellery. With the levy, jewellers feared that the ‘Inspector rajya’ would be back and this fear led to a widespread outrage among the jewellers for non acceptance of levy of excise duty on making of jewellery, thereby concentrating only on the ill effects of levy of excise duty on jewellery. With this article, I have tried to highlight some of the advantages which a jeweller can avail on registering under excise and same are as follows-
·               Availability of CENVAT Credit on inputs and input services used
A jeweller pays service tax on availing input services such as payment of rent of premises, certification charges and commission to agent for sale or purchase of jewellery etc. As the jeweller was providing exempt service earlier, it was not eligible to claim CENVAT Credit on tax paid on above service and the same would be added to the cost of the product thereby increasing the total cost price of the product. With the final product being subject to duty, the jeweller would be eligible to claim CENVAT Credit of above taxes thereby reducing the total cost price of goods sold. An illustration of the same is explained as under-
PARTICULARS

DEALER IS REGISTERED UNDER EXCISE
DEALER IS NOT REGISTERED UNDER EXCISE
Expenses incurred liable to service tax (Eg: Renting of premises, audit service)
A
10000
10000
Value of goods purchased liable to tax
B
20000
20000




Taxes charged



Service tax charged (14%* A)
C
1400
1400
Swachh Bharat Cess charged (0.5%*A)
D
50
50
Excise Duty charged (12.5%*B)
E
2,500
2500
VAT charged (1.2%*B)
F
240
240
Total Cost (A+B+C+D+E+F+G)
G
34190
34190




Credit available to a dealer registered under excise (C+E+F)
H
4140

Credit available to a dealer not registered under excise (F)
I

240




Net Cost (G-H-I)
J
30050
33950




Selling Price
K
50000
50000
Profit (K-J)
L
19950
16050
·               No additional records to be maintained under Excise
A dealer register under excise is required to maintain requisite records having details of goods purchased and sold and duty availed and paid by cash. In the present case, as the jeweller is already registered under the state vat laws, all necessary records are already maintained by him and accordingly there is no requirement per se to maintain any additional records. (Clarifications on levy imposed on Jewellery, Press Information Bureau, 4 March 2016)
·               Sharing of CENVAT Credit among different units of same manufacturer
Generally a manufacturer having different units for manufacture of goods needs to register each unit under Excise for the purpose of levy and discharging of duty and credit of one unit can be used for payment of tax against that unit only. CENVAT Credit of common service can be distributed amongst other unit, however the manufacturer needs to separately register itself as an ‘Input Service Distributor’ for distribution of such credit; thereby undertaking compliance as a manufacture of each unit as well as an Input Service Distributor.
In case of jewellers, Central Government has permitted the jewellers to obtain a centralised registration for all premises; accordingly CENVAT Credit of one place can be easily distributed to other units; thereby apportioning the overall cost of running the business
·               Other benefits
  1. Simplified Quarterly return (i.e. ER 8) to be filed instead of monthly one
  2.  No requirement to file a stock declaration to the jurisdictional stock authorities
  3. Grant hassle free registration within two workings days of submission of registration application. Further there will be no post registration physical verification of premises
  4. Time period for taking central excise registration of an establishment of jeweller extended to 1 July 2016 (Circular no. 1026/14/2016-CX dated 23 April 2016)
  5. Threshold limit for registering under excise enhanced for jewellers i.e. a jewellery manufacture would be eligible to claim exemption from excise duty on first clearance upto Rs.6 crore during financial year, if aggregate clearance during the preceding financial year is less than Rs.12 crore.
Assumptions considered while preparing the above note:
  • It is assumed that jeweller is registered under Excise and his turnover of sale of goods has exceeded Rs 12 crore in the previous year and has also exceeded Rs 6 crore in the current year

  • Jeweller has opted option for availment of CENVAT Credit
  • The jeweller is undertaking business of manufacturing and trading of jewellery which is liable to excise duty and is not undertaking pure trading business. Accordingly entire CENVAT Credit on inputs and input service would be available.
    • (The above are author’s own views)

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