Nodal jewellery trade body, All India Gem & Jewellery Federation (GJF), has met a dozen state finance ministers over the past three weeks, starting with Kerala’s Thomas Isaac, to “impress upon them” the need for goods and services tax (GST) of 1.25% on gold ornaments and bullion, its chairman Nitin Khandelwal told ET.
He said the Federation had “fruitful” discussions with a “positive” outcome. “We have met with a dozen finance ministers from states like Kerala, Rajasthan, Gujarat, Andhra Pradesh, Maharashtra, Gujarat, Kerala, etc, with a recommendation of 1.25% GST on jewellery,” he said.
“I can say that the ministers said they would ‘consider’ our recommendations and we are hopeful of our efforts yielding fruit.” Khandelwal’s comments assume significance, given that the Arvind Subramanian panel suggested a 4-6% GST on gold and Kerala’s state finance minister Isaac “vociferously” recommending a 4% rate.
Kerala is the largest consumer of jewellery among 29 states, accounting for around 40-50 tonnes each year, said Chirag Sheth, research consultant at precious metals consultancy Metals Focus.
However, Khandelwal said that though Kerala imposes 5% VAT on gold compared with 1% by other states, the effective rate is 1% because of a compounding scheme, whereby jewellers agree to pay a certain tax rate above that of the preceding year irrespective of turnover.
Presently, gold bars attract 10% import duty. Jewellery in most states, except Kerala, bear 1% VAT and 1% excise.
However, less than 10% jewellery manufacturers pay excise as they fall below the Rs 10 crore annual threshold for the levy, trade estimates. GJF argues that 1.25% will ensure greater compliance and accrue higher revenue to states than at present as the GST threshold is much lower at Rs 20 lakh a year.
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