The GST Fitment Committee has proposed hiking GST on gold and silver to 5% from the existing 3%. If the proposal is passed by the Government, this is bound to have a severe impact on the gems and jewellery (G&J) industry, which has just picked up pace. 

Reacting to the proposed hike, Shreyansh Kapoor, Kashi Jewellers, Kanpur, says, “This is a totally unnecessary move. The industry is agreeable to paying taxes, complying with rules. This move will surely upset the industry. See, gold is not a luxury commodity in India. It is a necessity. If this comes through, I feel the burden will come on the retailers. The ticket size in jewellery is big. The prices run in thousands and lakhs. A hike in GST will translate into a big jump in prices. It will discourage retailers from making proper bills, and will surely reduce the revenue of the Government.”

Industry players feel the move is very ill-advised. Explains Satinder Jain, Jain Jewellers, Bathinda, “This is very discouraging. Prices are already high, and the industry is grappling with the problems created by the HUID issue. If this extra burden comes on us, it will disturb the business greatly. The gems and jewellery industry is just coming out of the trauma caused by the COVID pandemic. This will be a big blow, if it comes through. In fact, we were expecting the Government to provide some relief to us. We are already abiding by the rules. What else are we asking for, other than ease of doing business?”

Retailers are particularly miffed about the timing of the proposed move. Says Tejpal Ranka, Ranka Jewellers, Pune, “After a long time, the industry has reached a point where everything is running smoothly. Everything is happening in a clean manner. The proposed hike will upset the apple cart. It will again push the industry into underhand dealings and smuggling of gold. The industry has accepted the 3% GST. An increase will add to the challenges we are already facing in view of high prices, COVID, etc. This is most unfortunate.”

Explains Vaibhav Saraf, Aisshpra Gems & Jewels, Gorakhpur, “The proposal to hike GST to 5% is detrimental, as gold is an asset for consumers, and being taxed at a higher slab reduces its viability as an asset. This will also lead to an increase in the black marketing of gold as consumers will not want to pay higher taxes. This will result in increased smuggling of gold too. The current gold prices are lower in the short term, in the long term, the value of the yellow metal always increases, and, therefore, a hike in GST while prices are low doesn’t cushion the impact in any substantial way.” 

Adds Shrey Mehta, Pooja Diamonds, Mumbai, “The increased GST will definitely encourage unorganized trade of gold and adversely impact organized retailers of our scale. Organized retailers like us follow every government norm and support every new policy by implementing it. The consumers should be given more benefits for buying from an organized retailer and not taxed more. The jewellery industry is anyways undergoing a lot of transformations with policies like HUID, and we hope that it isn’t burdened with an increased GST as well.” 

Agrees Aditya Pethe, WHP Jewellers, “We hope that the hike in GST is not implemented as it increases the cost for consumers to buy gold, even though the gold prices are steady like they are currently. Gold is a commodity that Indians buy not only for ornamental purposes but also as one of the forms of savings and building assets, and it should not have high taxes. Even a simple housewife who doesn’t understand other means of investment saves in the form of gold. 

“Organized retail players will always sell with bills, but this will encourage the unorganized sale of gold where the consumers will end up buying through unreliable sources who may not give the consumer legit products. Broadly speaking, this would encourage unorganized trade of gold and also make consumers vulnerable to scams. Gold prices keep fluctuating and a short-term dip in gold prices will not as such cushion the impact of increased GST as the consumer will not be able to enjoy the benefit of steady gold prices.”

Striking a different note, Ishu Datwani, Anmol Jewellers, Mumbai, says, “There are, and will always will be, people who want to save on GST, even if it is 3%. But for organized players like Anmol Jewellers, succumbing to pressure is not something we do. We believe in abiding by the law. The proposal to hike GST is ultimately affecting the reduction in gold duty, so, as far as the consumer is concerned, they will get the price benefit sooner or later as the rate/tax paid by the consumer will be compensated with the reduced gold rate in the future. The government is trying to streamline the duty structure as per international laws, and as an industry, we should support the same.”