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GJEPC welcomes IGST exemption on gold sourced from nominated agencies


The Gem & Jewellery Export Promotion Council (GJEPC’s) has welcomed the GST Council recent announcemnet that gem and jewellery exporters will no longer have to pay 3 per cent IGST to nominated agencies (banks) from 1st January 2019.

Commenting on the development, Pramod Kumar Agrawal, Chairman, GJEPC, said that “We commend this step undertaken by the Government. On recommendations of the Council, the GST Council ruled that it was satisfied and it is necessary in public interest to exempt the intra-State supply of gold falling in heading 7108 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), when supplied by Nominated Agency under the scheme for ‘Export Against Supply by Nominated Agency’. We are also expecting a similar relief from the Govt. to the exporters of articles of silver and platinum very soon.”

Agarwal added, “The upfront payment of IGST and import duty in the form of bank guarantee had further led to the huge working capital blockage for various small and medium jewellery exporters, increased interest cost, hassles of compliance to claim refund thus consequently impacting their business operations and global competitiveness.”

Post implementation of GST Regime and 3 per cent IGST on gold, the industry had requested for the IGST exemption on supply of gold by nominated agencies to exporters. Thereafter, the Government of India vide Notification No. 77/2017-Customs dated 13.10.2017 had exempted specified banks and Public Sector Units (Nominated Agencies) from payment of IGST on import of gold but the same had not benefitted the jewellery exporters as they still had to bear the upfront payment of IGST/GST and the basic import duty to the tune of 10% on procurement of gold for the purpose of manufacture of export of jewellery.

GJEPC is also pursuing key pending GST Issues including:

Problems faced by the traders because of the blockage of input tax credit (‘ITC’) due to inverted duty rate structure. Effective 25th January 2018, the GST rate on cut and polished diamonds and gemstones has been reduced from 3 per cent to 0.25 per cent, while GST rate of 5 per cent (job work charges)/18 per cent (others) applies on input services, leading to accumulation of ITC qua domestic supplies. The GJEPC has recommended that a single GST tax rate regime of 0.25 per cent should be levied across the entire value chain for diamonds/coloured gemstones/semi-precious gemstones.

Also, theGJEPC has raised the issue of exports made on consignment basis (including for foreign exhibitions, export promotion tours etc.) According to the Council, as the goods sent on consignment basis for the purpose of foreign exhibitions, export promotion tours is not a supply, GST should not be levied on goods exported for such purpose or when reimported back. GJEPC has asked the governmnet to issue a clarification in regard to the exemption for consignment import and export of gems and jewellery through exhibition/export promotion tours.

Moreover, refund of accumulated tax credit on account of inverted duty structure on input for a certain period is also troubling the trade. According to GJEPC, the refund claims filed on account of inverted duty structure being denied, substantial amount has been accumulated, which has led to the capital blockage of the diamond/coloured gemstone exporters.

GJEPC has said that necessary instructions must be issued to permit refund of accumulated ITC pertaining to stock of the stated products held as on the date of rate change. In addition to the above issues, GJEPC has also taken up the issue pertaining to import of gold on consignment basis for manufacture and export of jewellery.

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