GST Impact Study for Jewellers

GST IMPACT STUDY FOR JEWELLERY SECTOR

GST Council has decided 3% rate of GST on Gold under chapter 71. In the GST regime prices of Jewellery will be high as compared to in current scenario as the tax burden is more. We can understand the impact on price as under:   

Due to GST the prices of jewellery will be increased by 0.99% or 2.79% without making charges or including making charges respectively.

In the excise, SSI exemption up to Rs. 6 crore is available but this limit will remain up to Rs. 20 lakh in the GST. Due to this more assesses will cover under the GST.

Transitional Provision

If the person is registered under earlier law shall be entitled for CENVAT credit furnished by him in the return for the period ending with the day immediately preceding the appointed day. We can understand the impact as under:

Example:

Q. Mr. A registered under excise furnishes the return for the period ending 30th June 2017 with the CENVAT credit carried forward for Rs. 1,00,000/- Whether Mr. A is entitled for input of Rs. 1,00,000/- under GST?

A. Jewellery is taxable in the excise and the same will be taxable in GST. Hence the CENVAT Credit in his return is carried forward in GST.

If the person is not registered under earlier law and duty paying invoice for Jewellery as on appointed day is available then the person is entitled to take credit of duty & taxes mentioned in invoice. Subject to Invoice were issued not earlier than 12 months immediately preceding the appointed day.

Example:

Q. Mr. A not registered under excise and has the invoice dated 2nd June, 2016 for Jewellery containing excise duty of Rs. 18,000/-. In GST, Mr.A is liable to registered and the jewellery is in stock as on Appointed Day. Whether Mr. A is entitled to take credit of Excise paid on Jewellery.

A. Yes, Mr. A is entitled to take credit of Rs. 18,000.

If the person is not registered under earlier law and duty paying invoice for Jewellery as on appointed day is not available then the person is entitled to take credit of 40% of CGST or 20% of SGST. For the purpose of the credit, supplies have been made and tax liability on supply has been paid.

Example:

Q. Mr. A not registered under excise and No invoice held for Jewellery in stock as on Appointed Day. In GST, Mr.  A is liable to registered. Whether Mr. A is entitled to take credit of Excise paid on Jewellery.

A. Yes, Mr. A is entitled to take credit of 40% of CGST or 20% of IGST paid on Jewellery if supply of that stock is made and taxes CGST or IGST on such supply has been paid.

If person is registered as composition dealer in the earlier law and in the GST becomes as normal dealer, shall entitled to take the credit of eligible duties in respect of jewellery held in stock as on appointed day.

Example:

Q. Mr. A is composition dealer in excise and In GST he is registered as normal dealer. He has Jewellery in stock as on Appointed Day and also have invoice of duty paid on the same. Whether Mr. A is entitled to take credit of Excise paid on Jewellery.

A. Yes, Mr. A is entitled to take credit of Excise duty mentioned in Invoice.

JOB WORK FOR JEWELLARY SECTOR

In the current scenario, we can send the Gold for Job Work without paying any duty but the Jewellery shall be received back after completion of job work within 180 days of their being sent for Job work.

In GST, Jewellery can be removed for Job Work without paying any tax but prior intimation to commissioner is required. As per ITC rules, inputs shall be sent to Job Workers under the cover of challan issued by the principal and the detail of challan for Gold dispatched to the Job Worker shall be furnished in GSTR-1 for that period.

The Jewellery may be received back to the principal’s place without tax or to the customers’ premises on payment of taxes, within 1 year of their being sent for Job Work.

If Jewellery has not received back within 1 year then the date on which Gold sent for Job Work is date of supply of Gold and taxes with interest shall be paid accordingly.

Principal shall be liable to maintain the record of Gold sent for Job Work. For the purpose of this benefit Job Worker should be registered otherwise such place of Job Worker shall be declared as an additional place of business by the principal. [Section 143 of the IGST Act, 2017]

Example:

Q. Mr. P registered under Excise sent the Jewellery for Job Work to Mr. R on 15th March 2017.

I. Mr. R returned the Jewellery after completion of Job Work on 18th August 2017. Whether Mr. P or Mr. R is required to pay tax?

II. What If the Goods returned on 25th October 2017, Whether Mr. P or Mr. R is required to pay tax?

III. What If the Goods returned on 25th January 2018, Whether Mr. P or Mr. R is required to pay tax?

A. If the Jewellery received back before six month from the appointed day then there is no tax liability but the job worker and the manufacturer needs to file the detail of jewellery as on appointed day with the job worker. 

I. No Tax Liability as Jewellery has been received back before six months from the appointed date.

II. No Tax Liability as Jewellery has been received back before six months from the appointed date.

III. In this case Jewellery has not received back within six month from the appointed day. Hence it is deemed that supply has been made on the date when jewellery sent for job work i.e. 15th March 2017. And Tax and interest shall be payable accordingly.

INPUT TAX CREDIT IN CASE OF JOB WORK [Section 19]

If the Jewellery received within one year after completion of Job Work then the Principal is entitled for ITC on inputs sent for Job Work.

If the inputs are directly sent to Job Workers then, the date shall be counted from the date of receipt of inputs by Job Worker.

TRANSITIONAL PROVISIONS FOR JOB WORK

If the Gold & inputs is sent for Job Work before the appointed date and the same is received back after completion of job work within six months from the appointed day or Jewellery removed directly from Job worker, after payment of tax in India or without payment of tax for export within six months from the appointed day, no tax shall be payable, only if the manufacturer or Job worker declare the details of the Gold or Jewellery held in stock by Job Worker on behalf of the manufacturer on the appointed day in the prescribed time, form and manner.

JEWELLARY SENT FOR APPROVAL

In the current regime, there is no tax and no time limits for Jewellery sent on Approval.

In the GST regime, if the Jewellery sent for approval then the same should be under cover of delivery challan.

Section 31(7) of CGST Act mandate that the invoice for Jewellery sent for approval shall be raised earliest of the following:-

1. Time when it becomes known that supply has taken place.
2. Six months from the date of removal.

JEWELLARY SENT FOR EXHIBITION OR FOR THE PURPOSE OF OTHER THAN SUPPLY

If the Jewellery sent for exhibition in the same state then the same shall be removed under cover of delivery challan.

If the Jewellery sent for exhibition in other state then the person is required to obtain registration in such other state as causal taxable person (CTP).

For the purpose of obtaining registration as Causal taxable Person, the application shall be made at least 5 days prior to the commencement of business and estimated liability of tax shall be paid in advance. The amount so paid can be used for paying his liability of tax at the time of supplies made.

Example:

Mr. A registered person in Rajasthan is sending Jewellery of Rs. 1 crore to Gujarat for exhibition.

Q 1: Whether Mr. A is required to take registration in Gujarat?
Q 2: Whether Mr. A is required to pay tax on Rs. 1 crore?
Q 3: Whether Mr. A is required to pay tax on estimated supply?
Q 4: Assume exhibition is on 20th September 2017 when Mr. A shall apply for registration?
Q 5: What shall be charged by Mr. A in his invoice?

A. 1: Yes, Mr. A is required to obtain a registration in Gujarat as Casual Taxable Person.
A. 2: No, Mr. A is not required to pay tax on Rs. 1 crore, the Jewellery will be removed under cover of challan.
A. 3: Yes, at the time of registration of Casual Taxable Person, Mr. A is required to pay estimated tax liability.
A. 4: Mr. A shall apply for registration 5 days prior to the exhibition i.e. before 15th September 2017.
A. 5: In this case place of supply is Gujarat and Mr. A is required to charge IGST on the supply.

GST Tariff