Encouraged by the excise duty rollback, domestic retailers of gold and diamond ornaments are considering offering a 25 per cent discount on making charges on all jewellery. Set to begin next week, the first of its kind uniform discount offer from all jewellers across the country, would be valid for 10 days nationwide.
While announcing the Finance Bill in Parliament on Monday, Finance Minister Pranab Mukherjee announced the complete rollback of the excise duty levied on both, branded and unbranded jewellery. Also, the threshold limit on the cash purchase of jewellery worth Rs 2 lakh was extended to Rs 5 lakh, unchanged from the pre-Budget position. The one per cent excise duty on branded jewellery was levied during the Union Budget 2011-12, which was extended to unbranded ornaments in Budget 2012-13. The extension, however, invited widespread protests from the industry resulting in a 21-day strike that cost an estimated business loss of Rs 20,000 crore, in addition to Rs 700-crore tax collection loss to the exchequer.
The sentiment, however, has changed. The industry struck work at the peak wedding season, which drives demand through the year. The wedding season is now over, with little interest among consumers for extra gold and diamond jewellery, especially with the yellow metal quoting at Rs 29,000 per 10g.
"The offer is set to start next week to reward our loyal customers who held patience and supported us by not purchasing even a single piece of jewellery during the 21-day strike period. Though we have not decided the longevity of the offer period, it would not be less than 10 days," said Ashok Minawala, ex-chairman of the All India Gems & Jewellery Trade Federation (GJF).
The strike ended on April 7 on assurance by the finance minister and the Prime Minister's commitment for personal intervention.
Bachhraj Bamalwa, GJF chairman, said, "Excise duty as such was not a problem but, compliance was. We raised this issue repeatedly with the finance minister and the prime minister. We are delighted that they understood our problems. Had this excise duty not been rolled back, many small and medium jewellers and artisans would have gradually shut down their shutters. In the next four-five years, the impact would have been severe. Now, with this roll-back sentiment has been restored."
Unorganised sector players, the organised sector and branded jewellery retailers are taking part in this special discount offer. "It is a good move to boost overall sales during the ongoing lean season. We will certainly take part," said Mehul Choksi, chairman and managing director of India's leading branded jewellery retailer, Gitanjali Gems.
Another large branded jewellery retailer, Tanishq, has laid out its own strategy to boost sales during the current season. "Some of our offers may coincide with the industry's current move, but we can't specifically say we are participating in the discount offer. Each brand has its own significance and hence, the offer varies from brand to brand," said Sandeep Kulhalli, vice-president (retail and marketing), Tanishq.
Rajiv Jain, chairman of the Gems & Jewellery Export Promotion Council (GJEPC) is not convinced about the recovery of loss incurred by the industry during the protest. "Sales are very thin. The strike period (wedding season) was the boom season for the industry. Even a 25 per cent discount on making charges may not encourage consumers to pick gold and diamond jewellery to the tune they would have otherwise bought during the season," he said.
According to Rajiv Popley, director, Popley & Sons, "Excise rollback is a big moral boost to the industry. Many projects in manufacturing had gone on hold but now will be on fast-track. Retail expansions were put on hold, too, which would now be corrected."