Diamond GST News: Government Increases GST on Cut and Polished Diamonds from 0.25% to 1.5%
See Notification No. 7/2018 – Integrated Tax (Rates) As of January 25, 2018, the GST rate on cut and polished diamonds has been reduced from 3% to 0.25%, while the gemstone industry and of jewelry continued to bear GST between 1.5% (employment labor costs) to 18% (such as grading and certification fees, bank charges) on the purchase of input services as well as certain inputs /capital goods. Lack of opportunity to claim back this accrued input tax credit for input services under Section 54(3) of the Central Goods and Services Act 2017 (hereafter the “CGST law”), which has led to a huge accumulation of CII, with respect to transactions in the internal flow, the transactions of which end up resulting in exports.
The Gem and Jewelery Export Promotion Council (GJEPC), the supreme body for the gemstone and jewelery trade in India, through a series of representations, had called for an increase in the GST on cut and polished diamonds at 1.5%, a reduction in GST on grading and certification (GCS) to 1.5%, refund of accumulated ITCs, etc.
Colin Shah, Chairman of GJEPC, said: “We are grateful to the Minister of Finance for streamlining GST rates on cut and polished diamonds and alleviating the issue of ITC accumulation for the diamond sector. . It is estimated that around Rs 600 crore of ITC accumulation is there to date with the diamond industry. Increasing the rate of GST on cut and polished diamonds will not only stop the accumulation of ITC, but will free up stranded working capital and spur industry growth. We now urge the government to formalize a mechanism for merchants to receive a refund of accrued GST. »