The Goods and Services tax (GST) to be levied on gold jewellery has been fixed at the rate of 3% of its sale value. Though this is slightly more than the tax attracted by gold earlier, it is less than the 5% rate that was being anticipated initially, and is likely to benefit the gold jewellery industry. The implementation of GST is set to have a positive impact on the organized jewellery sector, and create an environment for gold to continue prospering.
While the industry might go through a brief adjustment period, the gold market is expected to become more transparent and organized because of GST. It should help improve greater tax compliance, which in turn would allow companies in the organized sector to compete with the prices offered by those in the unorganized sector. In other words, GST enables the cost gap to be reduced between organized firms selling gold and unorganized players in the market. With this reduction, it is likely that the organized sector will capture a greater share in the market and help grow their earnings. Market share gains for the organized sector could facilitate a level playing field in the gold jewellery industry and with earnings growing alongside the growth of the organized sector, economic growth would get a boost.
Transparency in the supply of gold ensures that only authentic products are available in the market. A reliable market allows the customer a degree of comfort and faith in the quality of gold that they purchase, which helps increase the demand for gold and with greater economic growth, catering to this demand becomes easier in the long run. A trust may be established between the buyer and seller.
Not only does the market for gold improve with the implementation of GST, but a customer may also choose to sell old items of jewellery and purchase new ones without facing any tax deductions. In other words, when someone sells old jewellery, 3% GST is levied on the amount realized through the sale. However, when the proceeds are used towards the purchase of new jewellery, the tax which has already been paid is to be deducted from the GST which is payable on the purchase. If, for example, you were to sell an old pair of gold earrings to your jeweller and use the proceeds towards purchasing a new gold necklace from them, the jeweller will first deduct 3% GST on the sale of the earrings and then adjust it against the purchase of the necklace. As a result, you do not face any tax deductions.
Do you think #GST Council should provide option to Revise Form GSTR-3B?— Tax Guru (@taxguru_in) November 13, 2017
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