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Jul 30, 2025
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Income Tax Department begins crackdown as jewellers strike gold with accounting trick
Amid spiralling gold prices, some of the jewellers have played around with accounting rules to suppress profits and pay lower tax.
The income tax (I-T) department has spotted a few units which violated regulations by changing the way they value their inventories-a trick that let them record lower profits, sources told ET. This, they said, has been going on for the past five to six years. Indeed, one of the jewellery houses has forked out close to Rs 100 crore tax on the suppressed earnings.
These jewellers are found to have switched the valuation strategy from FIFO (first-in-first-out) to LIFO (last-in-first-out) to lower the valuation of closing stock, comprising unused gold purchased as raw material, semi-finished products and unsold, finished jewellery. A closing stock value directly impacts profits-lower stock means lower profits and therefore lower tax.
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