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Gold jewellers in a fix as confusion over GST levy continues

They want uniform 2% levy, but may have to pay 18% on making charges; they are billed separately

Dilip Kumar Jha  |  Mumbai 

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As the rollout deadline nears for a national goods and services tax (GST), there is ambiguity on its applicability to jewellery.
 
A section of jewellers considers as a service charge and shows this separately while billing. If a service, the applicable rate would be 18 per cent, by the draft guidelines.


 
Another section of jewellers, however, adds in value of the jewellery; they do not show it separately but add it to the price of In this case, the applicable rate under would be two per cent (assumed, as the government is yet to formally state the rate for jewellery) on the cumulative value of the precious ornaments, if the government continues with the uniform rate on and jewellery.
 
“By the international standard, bills must be made showing separately. We have urged the government to levy the same rate on and jewellery (including on making charges) under GST,” said Surendra Mehta, secretary, India and Jewellers Association.
 
In the base case scenario, considering at Rs 30,000 for 10 gm and a making charge of Rs 4,000, a consumer needs to pay Rs 34,000 for 10g of jewellery. If a two per cent is applicable on the entire value of gold, the payable duty would be Rs 680 for the jewellery. If the two per cent is made applicable on (Rs 30,000 per 10gm) and an 18 per cent on making charges, the total duty component would be Rs 1,320 per 10 gm (Rs 600 on and Rs 720 on making charge). Thus, a consumer would have to pay Rs 640 extra if the making charge is separated from the value of
 
“In case the government seeks recovery of Rs 640 per 10g, calculated by charging 18 per cent on after a certain period, jewellers would face a big burden of Rs 5,200 crore,” said a senior industry official.
 
Currently, two applicable levies are charged from customers in two ways — a value added tax of 1.2 per cent in most states, barring Kerala (five per cent) and excise duty of one per cent. Some add the applicable making charge of 10-20 per cent in the value of

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Gold jewellers in a fix as confusion over GST levy continues

They want uniform 2% levy, but may have to pay 18% on making charges; they are billed separately

As the rollout deadline of the Goods and Services Tax (GST) is nearing, it has created the biggest ever confusion for its applicability regarding gold jewellery.A section of jewellers consider making charges as service charge and therefore, shown separately in the bill. Making charges, when considered as a service, under the definition, the applicable rate of GST would be at 18 per cent considering making charge as service charge as per the draft GST guidelines.Another section of jewellers, however, add making charges in value of jewellery and hence not shown separately but adding it to the price of gold. In this case, the applicable rate under the GST would be 2 per (assumed rate as government is yet to come out with rate for jewellery) cent on the accumulative value of the precious ornaments considering the government continues with the uniform rate on gold and jewellery under the GST."As per the international standard, bills must be made showing making charges separately. For ... As the rollout deadline nears for a national goods and services tax (GST), there is ambiguity on its applicability to jewellery.
 
A section of jewellers considers as a service charge and shows this separately while billing. If a service, the applicable rate would be 18 per cent, by the draft guidelines.
 
Another section of jewellers, however, adds in value of the jewellery; they do not show it separately but add it to the price of In this case, the applicable rate under would be two per cent (assumed, as the government is yet to formally state the rate for jewellery) on the cumulative value of the precious ornaments, if the government continues with the uniform rate on and jewellery.
 
“By the international standard, bills must be made showing separately. We have urged the government to levy the same rate on and jewellery (including on making charges) under GST,” said Surendra Mehta, secretary, India and Jewellers Association.
 
In the base case scenario, considering at Rs 30,000 for 10 gm and a making charge of Rs 4,000, a consumer needs to pay Rs 34,000 for 10g of jewellery. If a two per cent is applicable on the entire value of gold, the payable duty would be Rs 680 for the jewellery. If the two per cent is made applicable on (Rs 30,000 per 10gm) and an 18 per cent on making charges, the total duty component would be Rs 1,320 per 10 gm (Rs 600 on and Rs 720 on making charge). Thus, a consumer would have to pay Rs 640 extra if the making charge is separated from the value of
 
“In case the government seeks recovery of Rs 640 per 10g, calculated by charging 18 per cent on after a certain period, jewellers would face a big burden of Rs 5,200 crore,” said a senior industry official.
 
Currently, two applicable levies are charged from customers in two ways — a value added tax of 1.2 per cent in most states, barring Kerala (five per cent) and excise duty of one per cent. Some add the applicable making charge of 10-20 per cent in the value of
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Business Standard
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Gold jewellers in a fix as confusion over GST levy continues

They want uniform 2% levy, but may have to pay 18% on making charges; they are billed separately

As the rollout deadline nears for a national goods and services tax (GST), there is ambiguity on its applicability to jewellery.
 
A section of jewellers considers as a service charge and shows this separately while billing. If a service, the applicable rate would be 18 per cent, by the draft guidelines.
 
Another section of jewellers, however, adds in value of the jewellery; they do not show it separately but add it to the price of In this case, the applicable rate under would be two per cent (assumed, as the government is yet to formally state the rate for jewellery) on the cumulative value of the precious ornaments, if the government continues with the uniform rate on and jewellery.
 
“By the international standard, bills must be made showing separately. We have urged the government to levy the same rate on and jewellery (including on making charges) under GST,” said Surendra Mehta, secretary, India and Jewellers Association.
 
In the base case scenario, considering at Rs 30,000 for 10 gm and a making charge of Rs 4,000, a consumer needs to pay Rs 34,000 for 10g of jewellery. If a two per cent is applicable on the entire value of gold, the payable duty would be Rs 680 for the jewellery. If the two per cent is made applicable on (Rs 30,000 per 10gm) and an 18 per cent on making charges, the total duty component would be Rs 1,320 per 10 gm (Rs 600 on and Rs 720 on making charge). Thus, a consumer would have to pay Rs 640 extra if the making charge is separated from the value of
 
“In case the government seeks recovery of Rs 640 per 10g, calculated by charging 18 per cent on after a certain period, jewellers would face a big burden of Rs 5,200 crore,” said a senior industry official.
 
Currently, two applicable levies are charged from customers in two ways — a value added tax of 1.2 per cent in most states, barring Kerala (five per cent) and excise duty of one per cent. Some add the applicable making charge of 10-20 per cent in the value of

image
Business Standard
177 22