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Wednesday 8 July 2020

Why Kejriwal’s support to jewellers is wrong

Why are jewellers on strike against the government? A simple explanation:

whatsappThey can no longer do tax evasion, illegal import, sell jewellery in black or cheat the customers. The Union government has done an excellent job in one single act. The jewellers are going to pass the 1% tax to customers; these businessmen are not worried about that. So, what are they worried about?

  1. Illegal Import: Say, a jeweller sells gold ornaments weighing 1,000 kg a year. He has to pay 10% import duty for every gold he has imported. Of the 1,000 kg, if he has imported only 800 kg through a proper channel and the rest via black market, the state exchequer has lost 10% tax for 200 kg. After converting to jewellery, if the jeweller pays excise duty for the 1,000 kg gold sold, the customs department will ask where he got the additional 200 kg from. This will expose Jeweller A illegal imports. Almost all big jewellers does this. Hence, jewellers are against it.
  2. Tax evasion: In the case above, currently the jeweller pays tax on the sale of only 800 kg of gold, as only 800 kg was legally imported. For the rest, he does not pay tax. Now, after the excise duty, he has to pay tax for the remaining 200 kg as well.
  3. Selling jewellery in black: Most big jewellers sell in black to their largest customers (politicians, large farmers, govt officers, doctors, lawyers, etc) who themselves want to convert their illegal earnings to gold. Now, government is making PAN mandatory for any sale worth above Rs 2 lakh. This will make customers reduce their buying and, in turn, reduce jewellers’ sales in black.
  4. Cheating customers: In the scenario above, if the jeweller imports 800 kg and converts them into jewellery, he might charge 10-12% on wastage. So, for 800 kg, the wastage comes to 96 kg. But on this 96 kg, the actual wastage might be around only 10-16 kg (unrecoverable). The remaining 80 kg they convert as gold and sell to the customers. That is, the jeweller has imported only 800 kg but sold approximately 860 kg (780 actual gold + 12% wastage) gold. This will expose their act of cheating and force them to lower their wastage charges.
* The authorship of such opinions circulating on WhatsApp is unknown, and we do not vouch for the authenticity of data provided herein; they are quoted in our site to share interesting arguments with our readers

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