Giving a big relief to the jewellers and customers, the government has rolled back its budget decision to apply 1 percent tax on cash purchase of gold jewellery of Rs 2 lakh and above and raised the threshold to the earlier Rs 5 lakh, the revised rules will come to effect from June 1. India is the world's largest gold jewellery consumer and the Rs 5 lakh relief is expected to create some demand in the thin wedding season.
The jewellers had earlier been on a 45-day strike after Finance Minister Arun Jaitley in his Budget speech in February proposed 1 percent excise tax on non-silver jewellery. The decision has come at a right time when the jewellers are finding it difficult to offload their inventory that piled up following the strike. Gold demand in the country hit a seven-year low in the first quarter of 2016 when sales declined 41% year on year at 88.4 tonnes.
TCS, introduced as a measure to curb tax evasion and check black money transactions is collected by the seller from the buyer at the time of sale and is deposited with the government. The person from whom the TCS is collected gets credit for the same amount in his income tax return. TCS of 1% was imposed on cash purchase of jewellery worth Rs 5 lakh or more and of bullion worth Rs 2 lakh or more in 2012. However, in this year’s budget the government had reduced the TCS threshold on jewellery to Rs 2 lakh.