Notes on GST Impact – Jewellery Sector

August 23rd, 2017

** Information given in this article is for general purposes only. Please consult a professional to get the latest impact on taxation **

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 un-worked Diamonds and Industrial Diamonds charged at 2.5% . The Jewellers are also eligible 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 also reduced primarily because CST , Excise duty and State VAT have been eradicated.

With respect to the distinction between jewels sold as a brand or made to order, the question to be asked every time is – “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. Now under GST regime, if a customer gives gold to be designed 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 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 possibl. 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 may need to look at the fine print. With introduction of GST it has reduced the compliance procedures and has overall made it is easy to comply.

** Information given in this article is for general purposes only. Please consult a professional to get the latest impact on taxation **

Centum Technologies