The GST Council in its 21st meeting held on 9th September, 2017 has recommended changes in the rate structure of various items including products falling under Chapter 71.
As per the GST rates announced for rough diamonds the industrial and unsorted rough diamonds has been classified under 3 per cent rate of GST and non-industrial rough diamonds were classified under 0.25 per cent rate of GST. However, the explanatory note for unsorted rough diamonds (HS 7102.10) also supports that rough diamonds falling under other HS code can also be treated as unsorted rough diamonds.
The aforesaid discrepancy if not corrected, taxing imports of various forms of rough diamonds under GST would be susceptible to diverse treatment by customs department.
Based on Council’s persistent efforts GST rate on Industrial and unsorted diamonds has been reduced from 3 per cent to 0.25 per cent.
“The GJEPC welcomes the pragmatic decision of GST council for harmonising the GST rates for import of rough diamonds and reducing it from 3 per cent to 0.25 per cent for industrial and unsorted category. The harmonised rates of GST were very essential for the ease of doing business and will support the diamond trade to import the goods in respective category without any fear of imposing of higher rate of GST by the department. The reduction in duty of Coral and Articles of Coral is a welcome step which will be beneficial to colour gem stone industry. The industry was facing challenges while importing mother of pearl and now GST rate is announced for Plain mother of pearl @ 3 per cent and its articles @ 12 per cent which will allow jewellers a hassle free import of the product,” Praveenshankar Pandya , Chairman , GJEPC.
Pandya added that however the G & J sector is waiting for acceptance of its two major recommendations to boost the exports of this sector.
The polished diamond moves through several hands before it is exported from India and imposition of GST at every transaction or dealing is leading to bottlenecks and blockage of the capital in way of exports as it attracts payment of taxes and subsequent refund after exports. Lot of small units do not have cash flow or loan from banks to support the immediate payment of GST and have reduced manufacturing which is evident from declined exports of last two months. No other competing diamond processing country has this type of system of levying of GST and refund after exports. In other countries with similar diamond dispensation like Belgium or Israel, transactions taking place between a diamond dealer, manufacturer and exporter are controlled and monitored by allotting a special GST number. Any transaction taking place inside the group with such GST number is exempted from payment of GST, whereas transactions outside this circle is taxed at normal GST rate. G & J trade is not looking for any exemption but a system prevailing internationally for such transactions which are also export oriented. This should be addressed by announcement of similar Group Scheme as around 94 per cent of diamonds processed in India gets exported.
The Colour gem stone industry, similar in character and processes as that of diamond industry, is also facing a similar situation and needs to be covered under such scheme too.
Also the availability of Gold for exporters of jewellery has become a major issue post GST announcement due to imposition of 3 per cent GST at import level. The nominated agencies are providing gold to trade members with \nominal commission and premium based on their expense or risk perception. However, post GST, it has become difficult for them to continue with this business as the risk involved has increased due to which the premium for such gold supplied to exporters have gone up substantially. For exporters due to the refund system in GST and long gestation period till fixing of price and recovery of GST against exports, there is huge blockage of capital which is much more than the margins with no assurance of refund of the same amount of GST as paid by nominated agency as GST at import level. Council’s recommendation of introducing a system to accept bank guarantee against GST obligation at import level from exporters for supply of duty free gold by nominated agencies needs to be accepted and announced at the earliest to arrest the fall in exports of gold jewellery to the level of 30 per cent after introduction of GST at import level.
Chairman Pandya also welcomed the formation of the special committee to look after GST rules vis a vis exports under the Chairmanship of Revenue Secretary and expressed that he is hopeful that the Committee would consider the above two recommendations of the Council positively.