GST Impact on Export of Jewellery

By Registrationwala

29th May 2017


In a nation obsessed with jewels, so much so that it sees gems as a marker of how well-off one is, it is important that the industry does well.

The Goods and Services Tax (GST) regime is upon us. While the rates for most of the items have been put out on the table by the government, the rates for the gems could not be decided in the 14th GST council meeting that was held in Srinagar in the penultimate week of May. And now it is expected that the rates will be made public by the Government of India on June 3, 2017.

To remind you, the GST goes live in India on July 1, 2017 and is set to severely impact the economy of the nation. We will have one tax as opposed to many levied by State and the Center, and with input tax credit now available to the traders now, the scenario is set to change drastically and only time will tell if this tax overhaul, the biggest in independent India, is a success.

What is the fear regarding export?

The Ministry of Commerce has estimated that a higher Goods and Services Tax (GST) on the gems and the jewellery that is being made out of them, will mean that the export will be affected, and hence the country's revenue will take a major hit, unfavorably at a time when India is in contention for evolving into a major business house for the world. Such a move, that is of charging a GST that is higher than the summation of all the indirect taxes right now, will mean that the export market will be susceptible to becoming uncompetitive.

The rates in the international market is fixed, and for items like gems, it does not fluctuate much, like say it does for petroleum products.

Now if the government charges higher GST on gems, it will need to be estimated how much support the business of gems will need from the commerce ministry so as to sustain without incurring heavy losses.

The Gem and Jewellery Export Promotion Council (GJEPC) wants the GST rates to be around 1.25 per cent, while it wants the exemptions to continue for diamonds. The Council fears that if the government goes with a higher GST rate, it will let loose its grip on the global market and will live on to see the industry suffer.

A lot of potential at risk

There is a high demand from Middle East and South East Asia, and the gem and jewellery export looks set to flourish. It is estimated to grow at $42 billion. In the year 2016, the growth was put down as $36 billion, which means that the industry is set to see a good growth, thanks to the surge in demand from the geographies mentioned. While a 5 per cent newly imposed duty by Dubai means that the export has already been affected, the last thing the export industry wants is for the Government of India to charge a GST higher that the collection of taxes right now, and make export all the more tough a proposition.

In fact, the Gem & Jewellery Export Promotion Council had filed a representation with the government of India, requesting it to exempt gem and jewellery export from GST altogether. Also, all the related raw materials and their consumption, inputs and input services such as that of uncut rough diamonds, gold, silver, platinum (through duty-free export promotion schemes) should continue to be free from the charging of any import duty or GST. The council wants all transactions, whether direct or indirect, for exports, should continue to not be taxed with any indirect taxes in the GST regime that beckons us.

An estimated 4.6 million people are estimated to be involved in the export industry of gems, and so it is important that the government that takes very careful steps. Because one cold industry will not only impact the economy but will also put millions out of jobs.


GST Impact on Export of Jewellery