The 1 percent increase in excise duty on jewellery articles proposed under the Union Budget on Monday comes as negative for the company and the sector, says Bhaskar Bhat, MD of Titan.
Speaking to CNBC-TV18, he said that this will widen the gap between the unorganized industry as the latter does not have to bear this additional duty.
He said that the company has been burdened by the imposition of duties and withdrawal of the gold harvest scheme in the past and now it will bear these regulations as well.
Below is the verbatim transcript of Bhaskar Bhat's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Sonia: Can you tell us how much of a negative would this imposition of the excise duty be?
A: Excise duty was imposed some several years back and it was withdrawn. One percent of cost is not a big issue. Implementation is a problem and the last time the same thing happened because where to impose this duty and on whom to impose duty because jewellery is highly unorganised manufacturing. There are of course several units like ours. It is a one percent additional tax. One percent is no big deal for the consumer to pay.
Sonia: It wouldn’t have been a big deal, maybe a couple of years ago when demand was good but at this point when demand and sentiment is quite low, don’t you think this additional tax -- not only for you, it has come in for various sectors like autos etc as well, so I am asking you from a weak demand scenario, do you think things could get worse because of this?
A: I don’t think that one percent tax is going to affect the demand. I think demand drivers are other thing, I don’t think one percent particularly on jewellery is a big dampener and that is an honest opinion because when prices went up, people were buying jewellery, so people's ability to buy gold jewellery and desire to buy gold jewellery is still very high in India. I think the tax itself -- the problem itself still ends up with distortion. The additional tax over and above the 10 percent customs duty and this one percent causes distortion because significant part of the industry is unorganised.
Latha: That is the point because the unorganised sector will not be paying this, do you see some impact on your sales?
A: Yes, that is the cost we have been compliant. So, you have to bear with these things and ensure that things change. I don’t think imposition of one percent duty like this you should be complaining about.
Latha: In any case what is the kind of revenue growth you are expecting in the current quarter or for that matter, the first half of next year?
A: Current quarter has been slow. It is challenging but for us everything that has to happen has happened. For the industry in the sense we had to withdraw the golden harvest scheme and then the financing problems, so all this has led to significant impact on our business but the worst is behind us.