Impact of GST on Jewellery Sector

December 7th, 2017

GST on the whole has had a positive impact on all industries .

In the case of Jewellery sector there has been a positive impact but it has been a low impact . Rate of GST has been fixed as 3% except on unworked Diamonds and Industrial Diamonds charged at 2.5% . The Jewellers are able to take input credit . The present rate of 3% is only marginally higher than the earlier tax of 2.5% which included 1% Excise duty and 1.5% VAT but the Industry is happy since the Jewellery Sector received a special rate of 3% which was below the 5% GST rate . With the introduction of GST the compliance procedures are reduced primarily because CST , Excise duty and State VAT have been eradicated .

The Harmonised System of Nomenclature (HSN) is a multipurpose International Product Nomenclature developed by the World Customs Organisation .The purpose of using the HSN codes is to ensure that GST invoicing practices are in tune with International Standards of Product Nomeclature . The HSN code is very important and to have the correct classification , the Customs Classification , Chapter Notes and Section Notes are to be referred . The question to be asked everytimeis – “Are we providing a service or are we selling a product ? “ . This plays an important role in the decision of the HSN code as well as the tax rate applicable to any business . For example if we purchase jewellery at a store , before the introduction of GST the bill would be bifurcated into various parts like the value of gold , making charges , wastage charges , stone cost . The question that arises is that …. are we supposed to charge 3% on each part separately or should we charge on the final amount . According to GST we should charge 3% on the final amount only and not separately .

Earlier before GST , the making charges on Gold was fully exempted from tax and so many smaller jewellers used to take Gold as free issue item given by customer to avoid tax . Now under GST regime if a customer gives gold to the jeweller to design into another piece of jewellery , then it is a service provided and not a product sold . Here the tax will be 18% on the entire amount . If additional Gold is used by the jeweller to complete the item the additional Gold amount is taxed at 3% GST .

In the case of job work given by a jeweller to a goldsmith the tax varies depending on whether both are registered or unregistered .If the jeweller is unregistered tax is 18% and if he is registered then it is 5% . ( This reduction is perhaps to bring into the sytem as many jewellers as possible ) In the case of a Gold Scheme , the terms and conditions of the agreement are important . It is an advance amount and so the tax is 3% on the amount paid .

The forms to be filled under GST for the jewellery sector are GSTR 1 , GSTR 2 , GSTR 3 and GSTITC 04
It is clear that introduction of GST has a generally positive impact especially on the larger players and jewellery houses whereas the smaller players would not be very happy . With introduction of GST it has reduced the compliance procedures and has overall made it is easy to comply .

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