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Buoyed by a four percentage point cut in the rate of value added tax (VAT) in Gujarat's recent state Budget, Rajkot-based small and medium enterprises (SMEs) engaged in producing imitation jewellery are expecting a surge in business activity.
Recently, the Gujarat government slashed the value added tax (VAT) on imitation jewellery from the existing five per cent to one per cent in the state Budget.
The five per cent VAT on imitation jewellery had forced small, unorganised players in Rajkot to run their businesses without issuing bills.
"Many of us have been selling their jewellery without bills to avoid the burden of VAT. Even our buyers also preferred to purchase without bills, as imitation jewellery costs more in Gujarat than in other states. But, this activity will surely decrease as the state government has slashed VAT," said Narendra Mehta, president, Rajkot Imitation Jewellery Association.
Nearly 75 per cent of business is done without issuing bills, Mehta admitted, as most of players are unorganised.
Rajkot's major competition in the imitation jewellery business is from Maharashtra (where the VAT rate is one per cent) and Uttar Pradesh (where imitation jewellery is exempted from tax).
The demand for imitation jewellery has increased by 50-60 per cent over the past three years across the country, with television serials influencing buyer sentiment.
Mehta said, "Demand across the country has increased. Exports are also going up, as demand from the Gulf countries has gone up in the last few years. Currently, Rajkot does not export directly, but we have the potential to do international business, and reduction in VAT will certainly help."
Currently, exporters, most of whom belong to Mumbai, and big brands purchase imitation jewellery from Rajkot, as the city is famous for hand-made jewellery.
There are over 250,000 people connected with making imitation jewellery in Rajkot and its surroundings. The annual turnover of the industry is about Rs 500 crore in Rajkot. According to industry sources, turnover could touch Rs 800 crore in the next two to three years, as a result of the reduction in VAT.
The Rajkot Imitation Jewellery Association is also trying to organise the industry in the city and educate its members to create brands that will be able to tap into international markets.
