The Government of India has succumbed to internal and external pressure and lowered the Goods and Services Tax (GST) rate for wide variety of products and services - including 'job work' in the diamond industry - in an attempt to revive the economy. The announcements come as welcome news and should provide a much-needed boost to the gems and jewelry industry in India, hopefully stemming the tide of job losses in the sector.
Most significantly, the GST Council will cut the tax rates on 'job work' - diamond manufactuing and services outsourced to smaller units - to 1.5% from 5%. The diamond industry in India has been lobbying the government for reduction. "The measures will provide impetus to the sector, help upscale manufacturing and augment exports of gems & jewelry from India," as Pramod Kumar Agrawal, Chairman, Gem and Jewellery Export Promotion Council (GJEPC) told Business Standard. "The Government has given a positive stimulus to the economy and the industry facing challenging times due to slump in global demand and also due to low domestic consumption." In a statement from the GJEPC issued over the weekend, he added, “The measures announced yesterday will enhance Ease of Doing business, boost exports and make India more competitive with respect to neighbouring countries and attractive as an investment destination.” The GJEPC adds that this change will reduce the burden of blocked working capital - which would encourage manufacturers to opt for more outsourcing - and enhance competitiveness on the international market.
Also, in a major boost to the gems and jewelry sector, the GST Council has recommended the reduction of the GST on cut and polished semi-precious items to 0.25% from 3% now. The diamond industry will also be among the beneficiaries of other overall measures announced by the Finance Minister Smt. Nirmala Sitharaman, such as reduction in corporate tax to 25%, a tax rate of just 15% for new manufacturing units and an enhancement of the export credit limit, which will make most MSEs, including those in the gem & jewelry sector, eligible for priority sector credit benefits.