Gold jewellers are into a bit of confusion on GST as there is anonymity over the gold jewellery in the market. The service charge is being portrayed as making a charge by most of the jewellery community and applies it to another bill, so as per the GST draft rules and guidelines, there is a levy of 18 percent straight. While the other community in the jewellers, the making charges are directly included in the cost of the jewellery, and does not show separately into the billing but makes it up in the gold price itself. The said case attracts tax rate up to 2 percent of the cumulative value of the expensive Ornament if in the case government continues to levy similar rates on jewellery and gold.
Surendra Mehta, secretary, India Bullion, and Jewellers Association said that “By the international standard, bills must be made showing making charges separately. We have urged the government to levy the same rate on gold and jewellery (including on making charges) under GST.” In the basic situation, assuming gold at Rs 30,000 for 10 gm and a making charge of Rs 4,000, a consumer needs to pay Rs 34,000 for 10 gm of jewellery. If a two per cent GST is applicable on the entire value of gold, the payable duty would be Rs 680 for the jewellery. If the two per cent GST is applied on gold (Rs 30,000 per 10gm) and an 18 per cent GST on making charges, the total duty would be Rs 1,320 per 10 gm (Rs 600 of gold and Rs 720 on making the charge). Overall, an extra burden of INR 640 will be on a customer if the making charge is separated from the service charge.
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A senior person from the sector made clear that, “In case the government seeks recovery of Rs 640 per 10g, calculated by charging 18 per cent on making charges after a certain period, jewellers would face a big burden of Rs 5,200 crore.” In the current scenario, there are two charges applicable to the customer like a value-added tax of 1.2 percent in most states, excluding Kerala which imposes five percent. The second one is excise duty which is rated at one percent while some jewellers add making charges up to 10-20 percent in the total valuation of the gold item.