India’s gems and jewellery industry wants the Goods and Services Tax (GST) on finished jewellery to be capped at 1.25%. It also demanded there be no GST on raw, cut and polished diamonds and coloured gem stones since most of these are exported.
“There is only 1% VAT on finished jewellery today. The status quo has to be maintained. On excise, there was an exemption limit of Rs 10 crore, which roughly covers 75% of the jewellers in India. So, we believe 1.25% is the right tax as it will be revenue neutral and the government won’t lose money on excise and VAT,” said Praveenshankar Pandya, chairman of Gems and Jewellery Export Promotion Council.
Currently, there is no duty on the import of diamonds with cut and polished diamonds being under zero-duty regime. Most states also charge value added tax (VAT) at 1% of the final sale price.
“India exports 93% of the diamond products. Any adverse tax on the import of diamonds or the trading of cut and polished diamonds will hurt India,” said Pandya.
Between April and August, India’s export of gems and jewellery rose 11% from $13 billion to $14.43 billion compared to last year. Exports of cut and polished diamonds rose from $8.64 billion to $9.19 billion during the same period, according to earlier data published by the council.
The industry is estimated to employ around 1 million people directly and 4.6 million semi-skilled workers in various areas. A higher taxation on the gems and jewellery sector may also hurt employment, he said.
In the GST Council meeting on Tuesday, a four slab structure – 6%, 12%, 18%, 24% and additional cess for luxury and demerit goods – was proposed. Gold is proposed to be taxed at 4%.
The All-India Gems and Jewellery Trade Federation has also proposed a minimal GST rate of 1.25% on gold and jewellery.
“The proposed rate of 4% will hamper the growth of the industry. It will also result in a drop in tax compliances and will encourage smuggling,” said Sreedhar GV, chairman, GJF.
The federation plans to send a representation to the finance minister on GST this week, he added.