Reports that certain state governments were pushing for higher tax rates under the forthcoming Goods and Services Tax (GST) regime has roiled the gem and jewellery industry.
Industry bodies representing diamond exporters and jewellers have begun lobbying for maintaining the present low rates. “Raw, cut and polished diamonds and gemstones should be exempted under the GST as most of these are exported,” said Praveenshankar Pandya, Chairman, Gems and Jewellery Export Promotion Council (GJEPC).
At present, only 1% VAT is levied on finished jewellery while jewellers with sales below Rs 10 crore are exempted from excise duties. The industry wants GST on finished jewellery to be capped at 1.25%, which, it says, would maintain revenues to the exchequer.
At the GST Council meeting earlier this week, it was reportedly proposed that gold be taxed at 4% under the GST regime.
The GJEPC has warned that any tax on imported diamonds and the cutting and polishing industry would hurt the export industry. India exports nearly 93% of the diamonds polished in the country.
Another trade body, All-India Gems and Jewellery Trade Federation, said it had sought a meeting with Finance Minister Arun Jaitley to press for lower GST on gold and jewellery.
At present, rough diamonds attract ‘nil’ duty while there is no duty on exports of cut and polished diamonds. The 10% import duty on raw gold is ‘set off’ when the finished jewellery is exported.