Excise Duty on Gold - Finance Bill, 2016

Dear Readers,

As we all know that the Hon'ble Finance Minister Mr. Jaitley has presented the Finance Bill, 2016 on 29th Feb, 2016 where he has made major changes in CETA, 1985 to levy the excise duty on jewellery. 
It is the need of an hour to write this article as some of my clients, friends and known who are jewellers are worried regarding this and seeking clarification on this levy.

Government has imposed  the excise duty of 1% (without Cenvat Credit) or 12.5% (with Cenvat Credit) on articles of jewellery (excluding silver jewellery, other than studded with diamonds or other precious stones namely, ruby, emerald and sapphire] with a higher threshold exemption up to Rs. 6 crore in a year and eligibility limit of 12 crore.

My friends, I want to make here one thing very clear and want to bring it to your notice that the excise duty rate is 1% if they don't claim any input credit of the excise duty paid by them else the rate will be 12.5%. 

This amendment makes it clear that the excise duty will be levied on gold jewellery but if silver jewellery is having precious stones like ruby, emerald and sapphire then that jewellery will also come within the purview of excise duty. 

To make it easy and simple to understand, first of all we have to understand the eligibility and exemption provided by FM.

A jewellery manufacturer will be eligible for exemption from excise duty on first clearances (sale) up to Rs. 6 crore during a financial year, if his aggregate domestic clearances (domestic sale) during preceding financial year were less than Rs. 12 crore. In other words, if the manufacturer is having aggregate value of clearances (sales) in a financial year exceeds Rs. 12 crore, will not be eligible for this threshold exemption in the subsequent financial year.

e.g. A manufacturer having turnover in current FY amounting to Rs. 10 crore and in subsequent FY having turnover of Rs. 11 crore then the duty will be payable by the manufacturer on the remaining amount of Rs. 5 crore (Rs. 11 crore - 6 Crore).

e.g. A manufacturer having turnover in current FY amounting to Rs. 13 crore and in subsequent FY having turnover of Rs. 11 crore then the duty will be payable by the manufacturer on the total amount of Rs. 11 crore.

Now the biggest question that arises in the mind of jewellers is "whether goods produced on or before 29.02.2016 but lying in stock on 29.02.2016 shall attract excise duty at the time of clearance or not?"

Answer to the question is YES goods lying in stock as on 29.02.2016 shall attract excise duty at the time of clearance. 

Manufacturer shall keep a stock declaration of finished goods, goods-in-process, inputs as on 29.02.2016, duly certified by a chartered accountant so as to enable them to claim the cenvat credit on the inputs or inputs contained in goods lying in stock.

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