"A proposal that has attracted public attention is the implementation of central excise duty on the unbranded precious metal jewellery at the rate of one percent. I would like to reiterate that this (levy) was well intended and introduced not so much for raising revenues but for rationalisation and movement towards the goods and services (GST) tax," Mukherjee said in the Lok Sabha while initiating a debate on the Finance Bill, 2012-13.
"However, the outpouring of sentiments inside and outside the house has indicated that we are not ready for it, and the government has decide to withdraw the levy on the branded and unbranded jewellery as from March 17, 2012," he stated.
Earlier, thousands of jewellers across India had gone on a 21-day strike after Mukherjee in his proposals for the union budget, 2012-13, had proposed one percent excise duty on unbranded jewellery and doubled the import duty to four percent on gold.
The strike came to an end after the jewellers were assured of a duty rollback by Mukherjee and Congress president Sonia Gandhi.
Mukherjee increased the transaction limit in tax collection at source (TCS) of one percent on all cash transaction exceeding INR2 lakh.
"To cut the flow of unaccounted money in the jewellery trade, the Finance Bill had proposed the collection of tax at source by the seller at the rate of one percent from the sale amount of one percent from the buyer for all cash transaction exceeding INR2 lakh," Mukherjee said.
"Responding to the representation made by the industry that this will cause undue hardship, I proposed to raise the TCS from cash purchase on jewellery from INR2 lakh to INR5 lakh."
However, Mukherjee retained the one percent TCS on cash transaction for bullion at one percent.
"The threshold limit for the cash purchase of bullion the TCS shall be retained at INR2 lakh. However, it is being clarified that bullion will not include any coins or other articles within 10 grams or less than that."
The industry welcomed the move and expressed its satisfaction over Mukherjee's statement on the roll-back of excise duty on unbranded jewellery. Both Confederation of All India Traders (CAIT) and Delhi Bullion and Jewellers Association welcomed the move.
"The step taken by the finance minister is a step forward to mitigate genuine problems of the lakhs of traders of jewellery as also of the crores of other people who are dependent upon the jewellery trade," said Praveen Khandelwal, secretary general, CAIT.
"The trade was certainly not interested in becoming subject to another Department of Excise. Already the trade is subject to numerous other taxes like Customs Duty, VAT directly and several other taxes indirectly.
The jewellers added that there was need to rationalise the taxation system for a smooth transmission towards goods and service tax (GST).
"With GST round the corner, the government is under obligation to simplify and rationalise the taxation system in order to ensure smooth transformation from VAT (value added tax), excise, service tax to GST regime."