 "Share of organised jewellers to go up")
Organised jewellery retailers see their market share going up after implementation of the Goods and Services Tax (GST) Bill, but if the tax rate and customs duty are not brought down, it could lead to a rise in smuggling of gold.
Also sellers of old jewellery will receive a lower amount in the GST regime.
"This is a progressive step that will make the industry more organised and transparent," said Sandeep Kulhalli, vice-president, retail and marketing, Tanishq.
The GST rate is expected to be 18 per cent, which some jewellers said would be applicable to their industry too. Jewellers now pay a little over 12 per cent tax-10.33 per cent customs duty and one per cent each as excise and VAT when they take input credit for excisable jewellery.
"If the GST rate is set at more than 12 per cent for jewellery then the import duty will have to be cut proportionately. Assuming the government sets the GST rate at 15 per cent and with a 10 per cent import duty the difference in the local and international price of gold will widen to 25 per cent, which will lead to more smuggling," said Balram Garg, managing director, PC Jewellers.
Smuggling of gold is on the rise with an estimated average 20 tonnes arriving in the country every month since April. Ketan Shroff, director of India Bullion and Jewellers Association, said off-market transactions would shoot up if GST rates were kept high.
Old jewellery is likely to fetch less in the GST regime, discouraging sales of scrap gold. Jewellers would receive lower input credit on gold from used jewellery, said Surendra Mehta, secretary, India Bullion and Jewellers Association. Consumers would have to bear this cost and this would discourage selling of scrap gold, he added.
India's collection of scrap gold was 86 tonnes in 2015-16.
Sellers now accept a 5-10 per cent loss on account of purity. If the GST rate on jewellery is 18 per cent, sellers' realisation will be 23-28 per cent lower because jewellers will not receive input credit for scrap gold.
GST TO PINCH CONSUMERS' POCKETS
Consumers to get lower realisation for scrap jewellery
If you sell to 100 gm jewellery for cash > Highest rate in Hyderabad
Largest import centre: Vijaywada
Also sellers of old jewellery will receive a lower amount in the GST regime.
"This is a progressive step that will make the industry more organised and transparent," said Sandeep Kulhalli, vice-president, retail and marketing, Tanishq.
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The share of organised sector jewellers could improve from 25 per cent to 40-45 per cent within a year of implementation of the GST. "The GST will shift unorganised sector players to the organised sector," said Rajesh Mehta, chairman, Rajesh Exports.
The GST rate is expected to be 18 per cent, which some jewellers said would be applicable to their industry too. Jewellers now pay a little over 12 per cent tax-10.33 per cent customs duty and one per cent each as excise and VAT when they take input credit for excisable jewellery.
"If the GST rate is set at more than 12 per cent for jewellery then the import duty will have to be cut proportionately. Assuming the government sets the GST rate at 15 per cent and with a 10 per cent import duty the difference in the local and international price of gold will widen to 25 per cent, which will lead to more smuggling," said Balram Garg, managing director, PC Jewellers.
Smuggling of gold is on the rise with an estimated average 20 tonnes arriving in the country every month since April. Ketan Shroff, director of India Bullion and Jewellers Association, said off-market transactions would shoot up if GST rates were kept high.
Old jewellery is likely to fetch less in the GST regime, discouraging sales of scrap gold. Jewellers would receive lower input credit on gold from used jewellery, said Surendra Mehta, secretary, India Bullion and Jewellers Association. Consumers would have to bear this cost and this would discourage selling of scrap gold, he added.
India's collection of scrap gold was 86 tonnes in 2015-16.
Sellers now accept a 5-10 per cent loss on account of purity. If the GST rate on jewellery is 18 per cent, sellers' realisation will be 23-28 per cent lower because jewellers will not receive input credit for scrap gold.
GST TO PINCH CONSUMERS' POCKETS
Consumers to get lower realisation for scrap jewellery
If you sell to 100 gm jewellery for cash >
- You will lose the making charge paid at the time of buying
- The jeweller will cut at least 5-10%, or even more, as alloys are used in manufacture, which makes gold less pure
- If the rate is 18%, jewellers will further cut 18%, as jewellers will not get input credit when they melt jewellery. Jewellers will also remove stones if the jewellery is studded, which will not fetch anything unless these are real pearls or diamonds
- Lowest rate in Mumbai