JOIN USThe Goods and Services Tax (GST) regime will provide a fillip to organised jewellery retailers by weaning business away from unorganised players, who currently account for three-fourths of the industry’s annual revenue estimated by Crisil at about Rs 2.85 lakh crore.
Besides GST, other measures such as ban on cash purchases of more than Rs 2 lakh per transaction, gold-on-loan and gold deposit schemes are also beneficial for organised retailers, according to Crisil.
GST compliance is an effort-intensive process and will be more cost-effective for organised retailers because of their large scale of operations. In addition, they operate largely from leased premises and under GST, they will benefit from set-off of tax paid on rent. Further, because of the cascading nature of tax, the entire jewellery supply chain will come under the tax net, making it more traceable, which is advantageous to the organised retailers, according to Crisil.
Small hike
GST on gold jewellery has been set at 3%, a tad above the current tax rate of around 2%. Further, the tax on making charges has been set at 5% against nil tax earlier. The overall increase in end price of jewellery is expected to be about around 1%.
“The modest increase in the overall tax rate is not expected to impact demand. Further, better supply-chain efficiencies and enhanced transparency will provide an edge to the organised players and help them garner a higher market share over the medium term,” Crisil Ratings Director Amit Bhave said.