The 37th GST Council meeting headed by FM Nirmala Sitharaman concluded with amendments in the tax rates for different industries. One such industry is the diamond manufacturing sector for which the council deducted GST on job work from 5% to 1.5%.
Currently, the blocked working capital of Rs. 1,500 Crore in the defunct outsourced diamond polishing units is said to release as the documentaries are willing to issue fresh orders to these units, post GST relief. The initiative will lead to an increase in demand for outsourced diamond processing services.
Identically, the council has brought relief to the semi-precious stones polishing units by reducing GST rates to 0.25% from earlier 3%.
Talking about diamond industries, the extracted raw material (rough precious stone) is sent for further processing by the diamantaires either to their own units or the processing is outsourced to the smaller firms doing job work. It was basically the outsourcing sector that dragged the burden of 5% GST levy against which the diamond industry was demanding for reduction.
This amendment in the GST rates for job work services in the diamond industry will be an incentive for the sector leading to an increase in manufacturing and profitable export of Gems and Jewelry from India.
Government has reduced GST rates of job work diamond polishing sector to 1.5% from earlier 5%, the initiative will be a kick start towards boosting the country’s economy by means of exports and also the end of challenges faced by the sector due to fall in global and domestic demand for Gems and Jewellery.
Demonetization along with the imposition of GST led to crises in the market above which 5% GST rates on job work, the circumstances altogether forced diamantaires to restrict trade with outsourced firms and opt for their own finishing units as the former attracted more tax.
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Earlier documentaries outsourced 60% to 70% of their tasks to the smaller polishing firms. After demonetization and GST levy, the percentage dropped to 30%. That means out of 5000 to 7000 diamond polishing units only 30% were enjoying proper business while the rest were in the bane of GST levy and demonetization.
The situation is all set to change with the reduction in the rates of GST in the diamond polishing sector.
GJEPC appreciated the government’s decision of granting exemption from GST/IGST to specified nominated agencies who are engaged in import and supply to exporters of silver and platinum.
Accepting the recommendations proposed by GJEPC, the government will now make the supply of silver and platinum GST exempt when supplied by a nominated agency for export purposes. Diamond India Limited (DIL) has been included in the list of nominated agencies who can claim IGST exemption on imports of gold, silver, platinum so as to supply at NIL GST to jewellery exporters.
Not only this the government announced to make most MSMEs, including those in gems & jewellery, eligible for credit benefits. “Export credit limit has been enhanced to Rs 40 crore from Rs 25 crore earlier.”
