The gems and jewellery industry has welcomed the Centre's decision to keep the goods and services tax rates (GST) for gold at 3%, which is almost in the same range being levied by most of the states at present.
While most of the states have been levying between 2-2.5% tax on gold purchase, Kerala is the only state which has a tax rate of 5%.
"This is a landmark day for the jewellery sector as the government rightly kept the overall tax burden low in the industry, keeping in mind the unique characteristics of the gems and jewellery sector, the 'kaarigars' and small jewellers," All India Gems and Jewellery Trade Federation (GJF) Chairman Nitin Khandelwal said in a statement.
The GST Council has decided to tax gold at 3% as part of the proposed GST regime.
Praveenshankar Pandya, Chairman, Gem & Jewellery Export Promotion Council (GJEPC) has welcomed the Government’s move of keeping GST rate of 3% on gold and jewellery, but was disappointed with the taxing of diamonds at 0.25%.
“For a segment wherein 95% of the output is exported, and, whose global footprint is under constant stress from other competitive economies, an upfront levy of GST on rough imports, which was hitherto exempted, would invariably cause a major setback to the trade and impact India’s significance in the global markets. Owing to the thin margins in the segment, each businesses will have to re-evaluate the viability of conducting the cutting and polishing activity in India, in light of the extent of strain GST would bring on its working capital, and, eventually, this may lead to significant volume of flight of capital and employment to other jurisdictions,” Pandya said.
Meanwhile, World Gold Council MD, India, Somasundaram PR said GST is the single biggest indirect tax reform in India and is intended to bring transparency, increase tax compliance and improve transaction traceability.
"The government's decision to apply 3% GST on gold is an encouraging step in the current context to stabilise the industry and address the concerns of the millions employed in the industry," he added.
India Bullion and Jewellers Association (IBJA) Director and PNG Jewellers CMD Saurabh Gadgil said the declaration of GST for the gems and jewellery sector at 3% for gold articles and polished diamond and 0.25% on rough diamond is very positive move by the government.
"It will boost the organised players and trade, it is also a boon for the consumer and the government will also benefit as more and more players will become organised by complying to GST. We feel it is a win-win (situation) for everyone," added Gadgil.
Currently, the industry pays taxes around 2-2.5% so 3% is almost as good as no impact by the taxes, WHP Jewellers Director Aditya Pethe said. "Majority of the gems and jewellery sector is unorganised and a lot of players are in the rural regions too. With this taxation, many unorganised players will be encouraged to enter the organised trade. Overall, the bill does not seem to have an inflammatory impact as most of the rates are revolving around the current tax brackets," he added.
“This will have a positive impact on the sector and encourage it to be more streamlined. Consumers and jewellers will take the first few months to adapt to the new rule but once that phase ends, the market will stabilize. We think this new bill will bring about stability in processes and create a level playing field for businesses in the industry," said Samir Sagar, Director, Manubhai Jewellers.