GJEPC demands exemption for export sector from GST and minimal rate for domestic sector

New Delhi, Oct 20 (KNN) The Gem & Jewellery Export Promotion Council (GJEPC) has made a representation to the government urging it to ensure that the export sector is exempted from the proposed new GST regime and that the domestic sector is taxed at a minimal rate of between 0 - 1.25% on different products.

The industry has stressed that continued tax-exemption will help them maintain global competitiveness and leading position in the world, while a minimal GST rate of 1.25% on domestic jewellery sales would be tax-revenue neutral for the government and encourage greater transparency and tax compliance within the industry.

The GJEPC’s representation to the GST Council suggested that all raw materials (such as rough and polished diamonds and coloured gemstones), as well as inputs and input services that contribute to exports should be GST exempt i.e. 0%.

It further urged that Gold, silver and platinum may be taxed at 1.25% under GST (however, gold procured from nominated agencies for purpose of use in exports should continue to be exempted in line with  the existing framework). Also, the Gold / Silver / Platinum Jewellery (including studded jewellery and costume fashion jewellery) may be taxed at 1.25% under GST.

Explaining the rationale, Pandya pointed out that 93% of diamonds manufactured in India are exported (as per the latest De Beers study, 7% are consumed in India). Similarly, the bulk of coloured gemstones like emerald and tanzanite are also exported. Hence any tax on these raw materials would affect exports, and eventually affect India’s leading position in these sectors globally.

He also pointed out that jewellery sales in India currently attract a 1% VAT and experience has shown that higher rates actually encourage smuggling and evasion and affect revenue.

Further, the new excise duty is applicable only if the taxable turnover of the assessee is in excess of Rs. 10 crore, and that only 25% of businesses come under the tax net. Based on this, GJEPC in consultation with tax experts, have recommended a 1.25% GST rate to ensure that industry contribution to tax revenue does not drop.

GJEPC Chairman Praveenshankar Pandya said the implementation of the new tax system has to take into consideration that the industry comprises different segments, and there should be no uniform across the board tax structure.

The sector has also been selected as a thrust area for exports, Pandya said, explaining that the GJEPC’s representation was aimed at ensuring that the industry’s contribution to the economy would increase under the new GST regime.

He pointed out that the Council had undertaken an extensive consultation across the industry while preparing these recommendations – the membership base of over 7,000 exporters was consulted and larger meetings were held across the different regions of the country to solicit opinions from other members of the trade.