As we all know The Goods and Service Tax (GST) bill is passed and implementation of the same is likely to be from 01st July 2017, A “one nation one tax” i.e GST will replace the plethora of taxes levied under different names like service tax, value added tax, Central Excise etc. The gems and jewellery sector plays an important role in Indian economy. GST on gold industry has been pegged at an 5% rate. Due to GST, there will be no distinction between manufacturing and trading, no separate books, will be required to maintain. Moreover it will also reduce the cascading tax effect. The various aspect of jurisprudence, on gold jewellery, is discussed which may be helpful to the trade.
1. Goods received for repair / reconditioning, etc.
Repair / reconditioning will be treated as supply of services if it is with consideration and so far as it relates to furtherance of business. No supply if w/o without consideration. GST will be payable on transaction value, if gold added, it will be supply of goods.If w/o consideration ‘Bill of Supply’ can be issued.
2. Gold / old jewellery exchanged against sale of new jewellery.
“Consideration” in relation to the supply of goods and / or services to any person, includes“any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government”;
As such if the consideration is by way of gold/old jewellery, against sale of jewellery, then the same will be considered as “for consideration” and GST will payable on valuation arrived as per Rule 1 of Determination of Value of Supply, where
“the supply of goods or services is for a consideration not wholly in money, the value of the supply shall,
(a) be the open market value of such supply;
(b) if open market value is not available, be the sum total of consideration in money and any such further amount in money as is equivalent to the consideration not in money if such amount is known at the time of supply;
(c) if the value of supply is not determinable under clause (a) or clause (b), be the value of supply of goods or services or both of like kind and quality;
(d) if value is not determinable under clause (a) or clause (b) or clause (c), be the sum total of consideration in money and such further amount in money that is equivalent to consideration not in money as determined by application of rule 4 or rule 5 in that order”
In view of above GST will be payable on the Normal saleable value of the Jewellery, if sold without exchange of old jewellery.
3. Jewellery made for retail end-users who bring the gold required to make Jewellery in the form of old jewellery of gold or gold bar.
Process / treatment undertaken will tantamount to service in terms of Sr.No. 3 of Schedule II.read with Section 3(2) wherein “Any treatment or process which is being applied to another person’s goods is a supply of services”, and accordingly will be subject to GST.Valuation needs to be done in accordance with valuation provisions i.e. Transaction value for the job charges. Proper documents should be maintained as to receipt of the goods from the customer / sent for processing for final products and further supply of finish goods to customer
4. Job work
The Model GST Law (MGL) expands the defining scope of job work. Under Section 2(62) of the MGL, job work is understood to mean any treatment or processing done by a person on goods belonging to registered taxable person (Principal Manufacturer), thereby covering actions like repairs, maintenance, standardization, testing etc, including conversion of gold bar into jewellery.The goods can be removed on job work challan. Goods can also be sent for job work from one job worker to another job worker without payment of duty.
5. Purchase of old Jewellery
It will be considered as supply of gold from Consumer to Business (C to B), since it is not in the course of furtherance of business it will not be supply. Here if the customer is not having any documents, jeweller will not get any credit. In such a situation provision of deem credit should be allowed.
6. Status of stock on last day.
Transitional provision is allowed in respect of stocks held on the date of enactment. If Jewellery is purchased with duty of 1% Central Excise duty the credit will be allowed in CGST. Also State taxes if any same will be allowed in SGST. If no payment documents are available credit of CGST/SGST on stock will be allowed to the extent of 40% of the CGST/SGST rate applicable, on the particular goods i.e either Bullion or jewellery.
7. Sales return
If the sales return is from B to B, there will be invoice on the basis of which ITC can be availed. If C to B, he should have the purchase Tax Invoice, on the basis of which credit can be availed.
8. Goods sent approval Basis
Goods sent on approval is without consideration, hence as per Schedule I, to MGL, it will not be considered as supply. The jewellery can be removed under challan, provided under Invoice Rule, and also to maintain proper records of clearance/ receipt and supply if any.
9. To Note
If the Consignment value (not invoice value) of good is above Rs 50000/- e-way bill is compulsory, whether the same is for sale, job work, approval, repair or for any other purpose.