They can no longer do tax evasion, illegal import, sell jewellery in black or cheat the customers. Government has done a excellent job in one single act. The Jewellers are going to pass the 1% tax to customers, they are not worried about that. So what are they worried about?
1. Illegal Import: Imagine Jeweller A, who sells 1000 Kgs gold ornaments per year. He has to pay 10% import duty for every gold he has imported. Of the 1000 Kgs if he has imported only 800 Kgs via proper channel and rest via black market. So for 200 Kg govt. has lost 10% tax. After converting to jewellery, If the Jeweller A pay excise duty for 1000 Kg sold gold, customs will ask where did he get the additional 200 Kg. This will expose Jeweller A illegal imports. Almost all big jewellers does this. So they are against it.
2. Tax Evasion : In the above case, currently jeweller A will pay tax on the sale of only 800 Kg of gold, since only 800 kg was legally imported. For the rest he wont pay tax. Now after the excise duty, he has to pay tax for the remaining 200 Kg also.
3. Selling Jewellery in Black: Most of the big Jewellery sell in black to their largest customers (politicians, large farmers, govt officers, doctors, lawyers etc) who themself want to convert their illegal earnings to Gold. Now Govt. is making PAN mandatory for any sale above 2 Lakhs. This will make customers reduce their buying and in turn reduce Jewellers sales in black.
4. Cheating Customers: In above scenario if Jeweller A imports 800 Kgs and convert them to jewellery, A might charge 10-12% on wastage. So for 800 Kgs wastage comes to 96 Kgs. But on this 96 Kg, the actual wastage might be around only 10-16Kgs (unrecoverable). So remaining 80 Kgs they will convert it as gold and sell to customers. Now the Jeweller A has imported only 800 Kgs but sold ~860 Kgs (780 actual gold + 12% wastage) gold. This will expose their cheating of customers and will force them to lower their wastage charges.