GEMS & JEWELLERY INDUSTRY UNDER GST REGIME (PART-1)
By: – Dr. Sanjiv Agarwal
Goods and Services Tax – GST
Dated:- 21-1-2017
Prologue
The Gems and Jewellery sector play a significant role in the Indian economy, contributing to over 5 % of the country's GDP. As one of the fastest growing sectors, it is highly export- oriented and labour intensive.
Based on its potential for growth and value addition, the Government of India has declared the Gems and Jewellery sector as one of the focus area for export promotion. India is considered to be the hub of the global jewellery market because of its low costs and availability of high-skilled labour. The industry generated US$ 38.6 billion of revenue from exports in 2015-16, making it the second largest exporter after petro-chemicals. (Source: www.ibef.org)
Currently, gems and jewellery sector is exposed to various indirect taxes, viz. Excise Duty, Service Tax and VAT/Sales Tax. The current indirect tax regime in India provide
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on value without Cenvat credit on inputs and capital goods. (However, credit on input services is eligible), or
* 12.5% with Cenvat credit of inputs, input services, and capital goods.
VAT is levied at the rate of 1% or different rates (may vary from State to State) for sale in India.
Under the model GST law, lowest approved GST rate is proposed to be 5%. If gems and jewellery item will be classified under the lowest tax slab, then this will become a major concern for this sector paying excise duty @1%. As a result they may have to pay CGST/SGST @5% instead of what they are paying in existing taxation laws, i.e., 2% (1+1). This shall increase the prices of gems and jewellery. However, this will be subject to availing Cenvat Credit of tax paid on inputs.
For assessees who are paying excise duty @12.5%, if gems and jewellery is taxed @5%, then this will be a relief for them. However, classification of goods and/ or services is still pending for taxability of GST rate. Therefore, mor
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ased on the value of clearance) is presently available if the value of manufactured goods (on own or through job worker) cleared domestically has not crossed ₹ 1.5 crores. (all goods manufactured including silver jewellery).
Under GST regime, the threshold limit of ₹ 10/20 lakhs is provided for payment of GST. Since, under GST regime limit of threshold exemption will be reduced to ₹ 10/20 lakhs, it will adversely affect the manufacturers.
Shift in Taxable base from Service/Manufacturing/Sale to Supply
In service tax law, rendering of service is a taxable event for levy of Service Tax. Similarly, in the case of central excise, manufacturing is a taxable event for levy of central excise duty and sale is a taxable event under VAT laws for levy of VAT/Sales Tax. However, in GST regime, 'Supply' will be considered as a taxable event under GST.
Supply shall include:
* all forms of supply of goods and/or services made or agreed to be made for a consideration by a per
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he importation of services from a related person or any of his distinct establishment outside India without consideration, then such supply would also be covered under supply.
Time of Supply of Goods and/or Services
CGST/SGST/IGST shall be payable at the earliest of the following dates, namely:
* the date of issue of invoice by the supplier or the last date on which he is required to issue the invoice with respect to the supply; or
* the date on which the supplier receives the payment with respect to the supply.
Valuation
Transaction value shall be considered for payment of tax, with various inclusions prescribed in the valuation provisions/ rules.
Certain inclusions in the valuation are as follows:
* Any taxes, duties, cesses, fees and charges levied under any statute (like Basic Custom Duty and Anti-dumping Duty), other than SGST /CGST/IGST.
* Any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supp
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