Economy

Mixed reaction to GST rate on precious metals

The gems and jewellery industry seems to be in two minds on the rates set by the GST Council on Saturday. While the All India Gems & Jewellery Trade Federation has welcomed the 3% tax on gold, silver, and diamonds, the Gem & Jewellery Export Promotion Council has called the decision to impose a 0.25% tax on rough diamonds a retrograde step.

Finance Minister Arun Jaitley on Saturday said that due to a division in the GST Council on the tax treatment of gold, it was decided that a new slab at 3% be created for the precious metal, apart from the five slabs of exempt, 5%, 12%, 18%, and 28% currently in place. The Council also decided to impose a tax of 0.25% on rough diamonds.

“Taxing diamonds is a retrograde step and not in sync with equivalence policy,” Praveenshankar Pandya, Chairman, Gem & Jewellery Export Promotion Council (GJEPC), said. “Diamonds are the key raw materials for gem and jewellery exports business. Rough diamonds have been kept out of the purview of taxes even in various Asian countries which are globally competitive.”

“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,” Mr. Pandya said.

“While this is a new slab that has been created, keeping in mind the principle of equivalence, this is a good move,” MS Mani, Senior Director, Deloitte Haskins & Sells, told The Hindu. “Looking at excise duty and state-level VAT, the total tax rate on gold and silver was coming to 2.5%. This is a very sensitive item, so they came up with 3%.”

“The government should now ensure that other manufacturers who are currently classified in the 5% slab do not treat this rate slab as a precedent and start lobbying to move their products from 5% to 3%,” Mr Mani added.

While the 0.25% tax on rough diamonds has met with resistance, the 3% tax bracket for gold, silver, and diamonds has been applauded by the industry as a step that would increase the tax compliance and formalisation of the sector.

“This low GST rate would help the gold and jewellery trade to go for more compliant and would mature as an organised sector in the years to come,” Nitin Khandelwal, Chairman, All India Gems & Jewellery Trade Federation (GJF), said. “In fact, this move will encourage the industry to become more organised, and help GJF to take them towards the path of accountability and transparency.”

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Printable version | Feb 21, 2020 4:00:58 AM | https://www.thehindu.com/business/Economy/mixed-reaction-to-gst-rate-on-precious-metals/article18724102.ece

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