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3% GST on gold: The yellow metal will continue to shine; jewellers rejoice

The industry, however, needs clarity on standardised billing procedure for selling gold jewellery

Surendra Mehta 

Surendra Mehta, National secretary, India Bullion and Jewellers Association
Surendra Mehta, National secretary, India Bullion and Jewellers Association

Jewellers across the country are happy with the three per cent rate fixed on jewellery under the (GST). The Centre has definitely considered the demand of the industry while fixing the rates.

Currently, jewellers pay one per cent excise and 1.2 per cent value-added tax (VAT) over and above the 10 per cent customs duty on bullion. This effectively works out to 12.43 per cent. With the introduction of at three per cent for and 18 per cent for making charges, and keeping customs at 10 per cent, the effective rate comes to 15.67 per cent. So, the effective price escalation on jewellery comes to 3.24 percentage points. This is still a win-win for jewellers; they would not have expected anything better than this, particularly after the chief economic advisor's report of Rs 10,800-crore subsidy on
 
Besides, since the government will recover an additional Rs 6,000 crore from this industry, subsidy on would come down, considering an annual consumption of 700 tonnes.

At present, there is no service tax on making charge of jewellery. The council has not announced a similar rate of three per cent on making charges of jewellery. So, rate on making charges of jewellery falls within the 18 per cent tax bracket. Assuming a customer typically pays 12 per cent of the value as making charges, jewellery could become costlier.

DECODED: PRICE OF JEWELLERY UNDER GST

 
JEWELLERY: NOW vs THEN
Explained: How the price of jewellery will change after the introduction of (assuming price remains unchanged)

    Now After rollout
A. Price of (100 gm 995, in Rs)  263636 263636
B. Customs duty (10%) 26364 26364
C. A+B 290000 290000
D. Excise (1%) 2900 0
E. C+D 292900 290000
F. VAT (1.2%) 3515 0
G. E+F 296415 290000
H. (3%) 0 8700
I. G+H 296415 298700
J. Making charges (12% of price + customs) 34800 34800
K. I+J 331215 333500
L. on making charges (18%) 0 6264
       
Total price of jewellery (K+L)
331215 339764
Total taxes and duties (B+D+F+H+L)
32779 41328
Taxes and duties as & of value
12.43 15.68
       
Effective increase in jewellery prices
after implementation 
3.24 percentage points

The industry also needs clarity on standardised billing procedures in the country for selling jewellery, as some jewellers show making charges separately, while others include them in the price of The international norms say that making charges, wastages, and stones, among other things, must be shown separately in the sales invoice at the time of selling jewellery. It is important to understand that most jewellers do not have their own manufacturing unit, so they would be paying 18 per cent to workers making jewellery and collecting only three per cent from the customer. Thus, a jeweller needs to factor in the differential tax on making charge in the price of jewellery.

However, the industry has welcomed the government's decision, hoping this will not affect their business. However, this also means that there is no customs duty cut likely in the near future. Probably, the government does not want to look at customs duty on as of now, given the price structuring of the sovereign bond, which includes 10 per cent duty but excludes VAT.

With some states demanding rates as high as five per cent for under GST, the industry could not have expected anything better than this. Under the current three per cent rate, will keep glittering. The India Bullion and Jewellers Association has always demanded that the entire duty and current tax structure remain untouched under the regime, and this has been fully accepted by the government.
The author is the national secretary of the India Bullion And Jewellers Association Ltd

Disclaimer: Views expressed are personal. They do not reflect the view/s of Business Standard.

First Published: Sun, June 04 2017. 12:04 IST
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