GST IMPACT STUDY FOR JEWELLERY SECTOR

GST Council has decided 3% rate of GST on Gold under chapter 71. In the GST regime prices of Jewellery will be high as compared to in current scenario as the tax burden is more. We can understand the impact on price as under:

Price Impact due to GST 

Particulars Without Making Charges With Making Charges 
Before GST After GST Before GST After GST
A. Gold Price 100.00 100.00 100.00 100.00
B. Excise @1% 1.00 1.00
A+B 101.00 100.00 101.00 100.00
C. VAT @1% (Assumed no composition) 1.01 1.01
A+B+C 102.01 100.00 102.01 100.00
D. GST @3% 3.00 3.00
A+B+C+D 102.01 103.00 102.01 103.00
E. Making Charges (10% of Gold Price) 10.00 10.00
F. GST on Making Charges @18% 1.80
G. Total Price of Jewellary 102.01 103.00 112.01 114.80

 

E. Total Taxes Paid (B+C+D+F) 2.01 3.00 2.01 4.80

 

Total Increase in price due to increase of Tax Burden 0.99 2.79

Due to GST the prices of jewellery will be increased by 0.99% or 2.79% without making charges or including making charges respectively.

In the excise, SSI exemption up to Rs. 6 crore is available but this limit will remain up to Rs. 20 lakh in the GST. Due to this more assesses will cover under the GST. 

Transitional Provision 

If the person is registered under earlier law shall be entitled for CENVAT credit furnished by him in the return for the period ending with the day immediately preceding the appointed day. We can understand the impact as under:

Example:

Q. Mr. A registered under excise furnishes the return for the period ending 30th June 2017 with the CENVAT credit carried forward for Rs. 1,00,000/- Whether Mr. A is entitled for input of Rs. 1,00,000/- under GST?

A. Jewellery is taxable in the excise and the same will be taxable in GST. Hence the CENVAT Credit in his return is carried forward in GST.

If the person is not registered under earlier law and duty paying invoice for Jewellery as on appointed day is available then the person is entitled to take credit of duty & taxes mentioned in invoice. Subject to Invoice were issued not earlier than 12 months immediately preceding the appointed day.

Example:-

Q. Mr. A not registered under excise and has the invoice dated 2nd June, 2016 for Jewellery containing excise duty of Rs. 18,000/- . In GST, Mr. A is liable to registered and the jewellery is in stock as on Appointed Day. Whether Mr. A is entitled to take credit of Excise paid on Jewellery.

A. Yes, Mr. A is entitled to take credit of Rs. 18,000.

If the person is not registered under earlier law and duty paying invoice for Jewellery as on appointed day is not available then the person is entitled to take credit of 40% of CGST or 20% of SGST. For the purpose of the credit, supplies have been made and tax liability on supply has been paid.

Example:-

Q. Mr. A not registered under excise and No invoice held for Jewellery in stock as on Appointed Day. In GST, Mr. A is liable to registered. Whether Mr. A is entitled to take credit of Excise paid on Jewellery.

A. Yes, Mr. A is entitled to take credit of 40% of CGST or 20% of IGST paid on Jewellery if supply of that stock is made and taxes CGST or IGST on such supply has been paid.

If person is registered as composition dealer in the earlier law and in the GST becomes as normal dealer, shall entitled to take the credit of eligible duties in respect of jewellery held in stock as on appointed day.

Example:-

Q. Mr. A is composition dealer in excise and In GST he is registered as normal dealer. He has Jewellery in stock as on Appointed Day and also have invoice of duty paid on the same. Whether Mr. A is entitled to take credit of Excise paid on Jewellery.

A. Yes, Mr. A is entitled to take credit of Excise duty mentioned in Invoice. 

JOB WORK FOR JEWELLARY SECTOR

In the current scenario, we can send the Gold for Job Work without paying any duty but the Jewellery shall be received back after completion of job work within 180 days of their being sent for Job work.

In GST, Jewellery can be removed for Job Work without paying any tax but prior intimation to commissioner is required. As per ITC rules, inputs shall be sent to Job Workers under the cover of challan issued by the principal and the detail of challan for Gold dispatched to the Job Worker shall be furnished in GSTR-1 for that period.

The Jewellery may be received back to the principal’s place without tax or to the customers’ premises on payment of taxes, within 1 year of their being sent for Job Work.

If Jewellery has not received back within 1 year then the date on which Gold sent for Job Work is date of supply of Gold and taxes with interest shall be paid accordingly.

Principal shall be liable to maintain the record of Gold sent for Job Work. For the purpose of this benefit Job Worker should be registered otherwise such place of Job Worker shall be declared as an additional place of business by the principal. [Section 143 of the IGST Act, 2017] 

Example:

Q. Mr. P registered under Excise sent the Jewellery for Job Work to Mr. R on 15th March 2017.

I. Mr. R returned the Jewellery after completion of Job Work on 18th August 2017. Whether Mr. P or Mr. R is required to pay tax?

II. What If the Goods returned on 25th October 2017, Whether Mr. P or Mr. R is required to pay tax?

III. What If the Goods returned on 25th January 2018, Whether Mr. P or Mr. R is required to pay tax?

A. If the Jewellery received back before six month from the appointed day then there is no tax liability but the job worker and the manufacturer needs to file the detail of jewellery as on appointed day with the job worker.

I. No Tax Liability as Jewellery has been received back before six months from the appointed date.

II. No Tax Liability as Jewellery has been received back before six months from the appointed date.

III. In this case Jewellery has not received back within six month from the appointed day. Hence it is deemed that supply has been made on the date when jewellery sent for job work i.e. 15th March 2017. And Tax and interest shall be payable accordingly.

INPUT TAX CREDIT IN CASE OF JOB WORK [Section 19]

If the Jewellery received within one year after completion of Job Work then the Principal is entitled for ITC on inputs sent for Job Work.

If the inputs are directly sent to Job Workers then, the date shall be counted from the date of receipt of inputs by Job Worker.

TRANSITIONAL PROVISIONS FOR JOB WORK

If the Gold& inputs is sent for Job Work before the appointed date and the same is received back after completion of job work within six months from the appointed day or Jewellery removed directly from Job worker, after payment of tax in India or without payment of tax for export within six months from the appointed day, no tax shall be payable, only if the manufacturer or Job worker declare the details of the Gold or Jewellery held in stock by Job Worker on behalf of the manufacturer on the appointed day in the prescribed time, form and manner.

JEWELLARY SENT FOR APPROVAL

In the current regime, there is no tax and no time limits for Jewellery sent on Approval.

In the GST regime, if the Jewellery sent for approval then the same should be under cover of delivery challan.

Section 31(7) of CGST Act mandate that the invoice for Jewellery sent for approval shall be raised earliest of the following:-

I. Time when it becomes known that supply has taken place.

II. Six months from the date of removal. 

JEWELLARY SENT FOR EXHIBITION OR FOR THE PURPOSE OF OTHER THAN SUPPLY

If the Jewellery sent for exhibition in the same state then the same shall be removed under cover of delivery challan.

If the Jewellery sent for exhibition in other state then the person is required to obtain registration in such other state as causal taxable person (CTP).

For the purpose of obtaining registration as Causal taxable Person, the application shall be made at least 5 days prior to the commencement of business and estimated liability of tax shall be paid in advance. The amount so paid can be used for paying his liability of tax at the time of supplies made. 

Example:

Mr. A registered person in Rajasthan is sending Jewellery of Rs. 1 crore to Gujarat for exhibition.

Q 1: Whether Mr. A is required to take registration in Gujarat?

Q 2: Whether Mr. A is required to pay tax on Rs. 1 crore?

Q 3: Whether Mr. A is required to pay tax on estimated supply?

Q 4: Assume exhibition is on 20th September 2017 when Mr. A shall apply for   registration?

Q 5: What shall be charged by Mr. A in his invoice?

A. 1: Yes, Mr. A is required to obtain a registration in Gujarat as Casual Taxable Person.

A. 2: No, Mr. A is not required to pay tax on Rs. 1 crore, the Jewellery will be removed under cover of challan.

A. 3: Yes, at the time of registration of Casual Taxable Person, Mr. A is required to pay estimated tax liability.

A. 4: Mr. A shall apply for registration 5 days prior to the exhibition i.e. before 15th September 2017.

A. 5: In this case place of supply is Gujarat and Mr. A is required to charge IGST on the supply.

GST Tariff

Tariff Item Description of goods Rate
(1) (2) (3)
I. – NATURAL OR CULTURED PEARLS AND PRECIOUS OR SEMI-PRECIOUS STONES
7101

 

 

 

 

7101 10

7101 10 10

7101 10 20

 

7101 21 00

7101 22 00

 

 

 

 

 

Pearls, natural or cultured, whether or not worked or graded but not strung, mounted or set; natural or cultured, temporarily strung for con-venience of transport

Natural pearl:

Unworked

Worked

Cultured pearls:

Unworked

Worked

3% : 7101 Pearls, natural or cultured, whether or not worked or graded but not strung, mounted or set; Pearls, natural or culture, temporarily strung for convenience of transport.
7102

 

7102 10 00

 

7102 21

 

7102 21 10

7102 21 20

7102 29

7102 29 10

7102 29 90

 

 

 

Diamonds, whether or not worked, but not mounted or set

Unsorted

Industrial:

Unworked or simply sawan,       cleaved or bruted:

Sorted

Unsorted

Other

Crushed

Other

0.25% Rough diamond [7102]

 

3% : 7102 Diamonds, whether or not worked, but not mounted or set [other than rough diamond]

 

7102 31 00

 

7102 39

7102 39 10

 

7102 39 90

 

 

Non-industrial:

Unworked or simply sawn, cleaved or bruted

Others:

Diamond, cut or otherwise worked but not mounted or set

Others

 
7103

 

 

 

 

 

 

7103 10

 

 

7103 10 11

7103 10 12

7103 10 19

 

7103 10 21

7103 10 22

7103 10 23

7103 10 24

7103 10 29

 

7103 91 00

7103 99

7103 99 10

7103 99 20

7103 99 30

7103 99 40

7103 99 90

 

 

 

 

 

 

 

 

—-

—-

—-

—-

—-

—-

—-

—-

Precious stones (other than diamonds) and semi-precious stones, whether or not worked or graded but not strung, mounted or set; ungraded precious stones (other than diamonds) and semiprecious stones, temporarily strung for convenience of transport

Unworked or simply sawn or roughly shaped:

Precious stones:

Emerald

Ruby and sapphire

Other

Semi-precious stones:

Feldspar (Moon stone)

Garnet

Agate

Green aventurine

Other

Otherwise worked:

Ruby, sapphire and emeralds

Other:

Feldspar (Moon stone)

Garnet

Agate

Chalcedony

Other

3% : 7103 Precious stones (other than diamonds) and semi-precious stones, whether or not worked or graded but not strung, mounted or set; ungraded precious stones (other than diamonds) and semi-precious stones, temporarily strung for convenience transport
7104

 

 

 

 

 

 

7104 10 00

7104 20 00

 

 

 

 

 

 

 

Synthetic or reconstructed precious or semi-precious stones, whether or not worked or graded but not strung, mounted or set; ungraded synthetic or reconstructed precious or semi-precious stones, temporarily strung for convenience of transport

Piezo-electric quartz

Other, unworked or simply sawn or roughly shaped

3% : 7104 Synthetic or reconstructed precious or semi-precious stones, whether or not worked or graded but not strung, mounted or set; Ungraded synthetic or reconstructed precious stoned, temporarily strung for convenience of transport.

 

7104 90

7104 90 10

 

 

7104 90 90

 

 

Other:

Laboratory-created or laboratory grown or manmade or cultured or synthetic diamonds

Other

 
7105

 

7105 10 00

7105 90 00

 

 

Dust and powder of natural or synthetic precious or semi-precious stones

Of diamond

Other

3% : 7105 Dust and powder of natural or synthetic precious or semi-precious stones.
II.  – PRECIOUS METALS AND METALS CLAD WITH PRECIOUS METAL  
7106

 

 

7106 10 00

 

7106 91 00

7106 92

7106 92 10

7106 92 90

 

 

 

Silver (including silver plated with gold or platinum), unwrought or in semi-manufactured forms, or in powder form

Powder

Other:

Unwrought

Semi-Manufactured:

Sheets, plates, strips, tubes and pipes

Other

 
7107 00 00 Base metals clad with silver, not further worked than semi-manufactured 3% : 7107 Base metals clad with silver, not further worked than semi-manufactured.
7108

 

 

 

7108 11 00

7108 12 00

7108 13 00

7108 20 00

 

 

 

Gold (including gold plated with platinum) unwrought or in semi- manufactured forms, or in powder form

Non-Monetary:

Powder

Other unwrought form

Other semi-manufactured forms

Monetary

3% : 7108 Gold ( including gold plated with platinum) Unwrought or in semi-manufactured forms, or in powder form.
7109 00 00 Base metals or silver, clad with gold, not further worked than semi-manufactured 3% : 7109 Base metals or silver, clad with gold, not further worked than semi- manufactured.
7110

 

7110 11

 

7110 11 10

7110 11 20

7110 19 00

 

7110 21 00

7110 29 00

 

 

Platinum, unwrought  or in semi- manufactured form, or in powder form

Platinum:

Unwrought or in powder form

Unwrought form

In powder form

Other

Palladium:

Unwrought or in powder form

Other

3% : 7110 Platinum, unwrought or in semi- manufactured form, or in powder form.
 

7110 31 00

7110 39 00

 

7110 41 00

7110 49 00

Rhodium:

Unwrought or in powder form

Other

Iridium, osmium and ruthenium:

Unwrought or in powder form

Other

 
7111 00 00 Base metals, silver or gold, clad with platinum, not further worked than semi-manufactured 3% : 7111 Base metal, silver or gold clad with platinum, not further worked than semi-manufactured.
7112

 

 

 

 

 

7112 30 00

 

 

7112 91 00

 

 

7112 92 00

 

 

7112 99

7112 99 10

 

 

7112 99 20

7112 99 90

 

 

 

 

 

 

 

 

 

 

 

 

 

Waste and scrap of precious metal or of metal clad with precious metal; other waste and scrap containing precious metal or precious metal compounds, of a kind used principally for the recovery of precious metal

Ash containing precious metal or precious metal compounds

Other:

Of gold, including metal clad with gold but excluding sweepings containing other precious metals

Of platinum, including metal clad with platinum but excluding sweepings containing other precious metals

Other:

Of silver, including metal clad with silver but excluding sweepings containing other precious metals

Sweepings containing gold or silver

Other

3% : 7112 Waste and scrap of precious metals, of metal clad with precious metal.
III. – JEWELLERY, GOLDSMITHS’ AND SILVERSMITHS’ WARES AND OTHER ARTICLES  
7113

 

 

 

 

 

7113 11

 

7113 11 10

7113 11 20

7113 11 30

7113 11 90

 

 

 

 

 

 

Articles of jewellery and parts thereof, of precious metal or of metal clad with precious metal

 

Of precious metal whether or not plated or clad with precious metal:

Of silver, whether or not plated or clad with other precious metal:

Jewellery with filigree work

Jewellery studded with gems

Other articles of jewellery

Parts

3% : 7113 Articles of jewellery and parts thereof, of precious metal or of metal clad with precious metal.
7113 19

 

7113 19 10

7113 19 20

7113 19 30

7113 19 40

 

7113 19 50

7113 19 60

7113 19 90

7113 20 00

 

 

Of other precious meatl,whether or not plated or clad with precious  metal;

Of gold, unstudded

Of gold, set with pearls

Of gold, set with diamonds

Of gold, set with other precious and semi-precious stones

Of platinum, unstudded

Pares

Other

Of base metal clad with precious metal

 
7114

 

 

 

 

7114 11

 

7114 11 10

7114 11 20

711419

 

7114 19 10

7114 19 20

7114 19 30

7114 20

7114 20 10

711420 20

711420 30

 

 

 

 

 

 

 

Articles of goldsmiths or silversmiths wares and pares thereof, of precious metal or metal clad with precious metal

Of precious metal, whether or not plated or clad with precious metal:

of silver, whether or not plated or clad with precious metal;

Articles

Pares

of other precious metal, or not plated or with precious metal:

Articles of gold

Articles of platinum

Parts

Of base metal clad with precious metal:

Articles clad with gold

Other articles

Parts

3% :  7114 Articles of goldsmiths or silversmiths wares and pares thereof, of precious metal or of metal clad with precious metal.
7115

 

7115 10 00

 

7115 90

7115 90 10

 

7115 90 20

7115 90 90

 

 

 

 

Other articles of precious metal or of metal clad with precious metal

Catalysts in the form of wire cloth or grill, of platinum

Other:

Laboratory and industrial articles of precious metal

Spinneret’s made mainly of gold

Other

3% : 7115 Other articles of precious metal or of metal clad wit precious metal.
7116

 

 

7116 10 00

 

 

 

Articles of natural or cultured pearls, precious or semi-precious stones (natural, synthetic or reconstructed)

Of natural or cultured pearls

3% : 7116 Articles of natural or cultured pearls, precious or semi-precious stones  (natural, synthetic or re- constructed.)
7116 20 00 Of precious or semi-precious stones (natural, synthetic or reconstructed)  
7117

 

 

7117 11 00

7117 19

7117 19 10

7117 19 20

7117 19 90

7117 90

7117 90 10

 

7117 90 90

 

 

 

 

 

 

 

Imitation jewellery

Of base metal, whether or not plated with precious metal:

Cuff-links and studs

Other:

Bangles

German silver jewellery

Other

Other:

Jewellery studded with imitation pearls or imitation or synthetic stones

Other

3% : 7118 Coins.
7118

7118 10 00

 

7118 90 00

 

 

Coin

Coin (Other than gold coin), not being legal tender)

Other

3% : 7118 Coins.

Author Bio

Qualification: CA in Practice
Company: A K Sethi & Associates
Location: 16.JAIPUR / जयपुर, Rajasthan, IN
Member Since: 12 Jun 2017 | Total Posts: 3

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