Precious ornaments are estimated to become 3% costlier under GST
With only a few days more for implementation of the Goods and Services Tax (GST), jewellers have intensified their efforts to replenish inventory by offering discounts on making charges for ornaments.
Precious ornaments are estimated to become three per cent costlier under GST. At this time, jewellery demand normally declines.
Two-third of the demand comes from the rural sector and farmers' attention would be on sowing, planting and re-planting.
With the onset of monsoon rain, farmers purchase seed, fertiliser and pesticide by liquidating old ornaments, resulting in a sharp increase in scrap supply. And, demand for new ornaments declines sharply because of the lack of weddings, festivals and such occasions.
This year, however, the lean season demand also coincides with GST implementation, to start from Sunday. Till now, jewellers were charging value added tax (VAT) of one per cent over and above the price of gold, with the latter's price including the tax.
And, the norm was to less VAT to the government than they used to collect from customers.
"Now, jewellers would require to maintain books of the GST charged from customers.
The three per cent GST a customer pays would have to be passed on. So, jewellery is set to become costlier by three per cent," said Nitin Khandelwal, chairman, All India Gems & Jewellery Trade Federation.
With GST assumed to be applicable on inventory carried forward beyond July 1, jewellers are encouraging customers to buy ornaments now if the idea is to purchase in the near future. Tribhovandas Bhimji Zaveri, for instance, is offering a 100 per cent discount on making charges, which are 15-30 per cent on diamond-studded gold jewellery.
Titan, a Tata Group company, is offering up to a 15 per cent discount on making charges for such jewellery and 10 per cent on plain gold ornaments. And, a carat of extra purity on exchange of old gold.
"We have a 25 per cent discount in making charges of diamond jewellery and 10 per cent in gold jewellery for customers across most of our brands," said Mehul Choksi, chairman, Gitanjali Group.
Apart from three per cent GST on gold and 0.25 per cent on rough diamond import, there will be a five per cent GST on services rendered outside the factory premises.
This means, diamond processing would be costlier by three to four per cent, said Praveen Shankar Pandya, chairman, Gems & Jewellery Export Promotion Council.
Photograph: Shailesh Andrade/Reuters