The Goods and Services Tax (GST). which is the single-biggest tax reform to be introduced in India, aims at eliminating the difference in indirect taxes applicable across various states and is expected to be implemented in July this year. The GST rate for the jewellery sector is expected to be announced soon, as the industry awaits with bated breath.
The All India Gems and Jewellery Trade Federation (GJF), national nodal trade body for the promotion and growth of trade in gems and jewellery across India, has proposed Goods and Services Tax (GST) rate of 1.25% for the gems & jewellery sector in their representation to the government.
Over the past few months, GJF has met FM Arun Jaitley, Revenue Secretary, more than 15 state FMs, VAT & GST Commissioners and many other Government bureaucrats for GST concerns.
"In our representation to the Finance Ministry, we have urged the government to charge GST rate of 1.25% for the gems & jewellery sector. The 1.25% GST will generate more tax revenue for the government than what the current tax system is generating. One percent for the state and 0.25 percent for the Centre," said Ashok Minawala, Past Chairman and High Level Committee Member, GJF.
The HLC Report, which was unanimously accepted by the government, was prepared after taking the suggestions and recommendations from over 60 associations of India into consideration, he said.
“The industry is working on wafer thin margins. The consumer will not be happy and ready to pay more. If GST is proposed at a higher rate, consumers will try to get the products without paying GST, which will lead to black money creation, he warned.
Keeping in mind, the unique characteristics of the gems & jewellery sector, the karigars and small jewellers were kept out of purview of the Excise Duty. Therefore, while we welcome GST we request the GST Council to kindly recognise the practical issues faced by the sector as highlighted in the HLC Report before making any decisions. Also the Job worker should be kept out of purview of GST as their tax liability is not there in Service Tax and Excise,” Minawala said.
Manoj Jha, Director - GJF, said, "The GST council has proposed multiple GST code for the gems and jewellery industry, consisting of 13 major codes with over 50 sub codes. We have explained the criticality of the HSN code to the government, wherein GJF feels that for an unorganised industry, it will be extremely difficult for over 80% of the players to adhere this compliance procedure."
"It will be an arduous task to maintain stock at the 8 digit level of HSN and potentially result in legal complications with the tax authorities. It is recommended that one standard HSN code to be maintained for the industry," Jha said.
“We are hoping Gems and Jewellery Industry to fall under the 2% slab of GST. As the industry is unorganized and a lower rate would not create deep ruptures for both consumers and jewelers. However, only time will show us the clear picture. We hope GST is applied to all jewellers at pan India level including small players in remote areas so that fairness is maintained in the otherwise unorganized industry, if the implementation is seamless then the impact will be even and fair too. Big jewellery chains as it is follow all the compliances and if the small jewelers don’t, it becomes unfair for the bigger player as the consumer preference shifts more towards unorganized,” said Aditya Pethe, Director, WHP Jewellers
Post implementation of GST, it will take the initial quarter for the buyers & sellers to get accustomed with the new tax policy of GST. Overall, this step looks promising and might bring a balance amongst players at all levels of the gems & jewellery sector, Pethe added.
Samir Sagar, Director, Manubhai Jewellers said, “We are waiting for the GST list announcement as market is on a stand still. Though business is ongoing but from strategic perspective, many decisions the brand would make, will rely on GST announcement. Consumers and jewelers will take the first few months to adapt to the new rule but once that phase ends, market will stabilize. The bill will be announced just before the wedding season and thus, we are hoping that this year’s wedding sales will not be affected by it. However, it all depends on what slab the gems and jewellery industry falls in.
Having said that, we think this new bill will bring about stability in processes and create a level playing field for businesses in the industry.” “The initial 2 months will be a difficult phase as we will have to understand the intricacies of GST. Depending on the quantum of tax imposed on Jewellery, there will be a resistance initially but eventually things will settle in about 2-3 months. I would wish the GST imposed on Jewellery is not more than 2%, but I’m expecting it to be closer to 4%,” said Ishu Datwani, Founder, ANMOL.