Impact on Jewellery Sector Goods & Service Tax Impact on Jewellery Sector By CA Ranjan Mehta

Introduction 29/07/2017 ©Ranjan Mehta & Associates

GST – Why so much buzz Biggest Indirect Tax reform since independence impacting each transaction Significant change in Tax administration system Impacting all Stakeholders – Business, Government, Consumer Will make indirect tax environment more simple, stable and predictable Applicable from 1st July 2017 29/07/2017 ©Ranjan Mehta & Associates

Fact about GST in World Economy 29/07/2017 ©Ranjan Mehta & Associates

Impact of GST on Jewellery Sector 29/07/2017 ©Ranjan Mehta & Associates

Major Changes Supply based Tax Destination based Consumption Tax Advance Received Taxable Matching of Input Tax Credit 37 Returns for each Registration State Wise Registration Reverse Charge 29/07/2017 ©Ranjan Mehta & Associates

Current Tax Structure Tax Tax Rate (Amount) VAT – Composition Rs. 1000 per Rs. 2 Lakhs VAT 1% (Without Composition Scheme) Excise 1% (Without CENVAT) 10% (With CENVAT) CST 1% 29/07/2017 ©Ranjan Mehta & Associates

Transactions 29/07/2017 ©Ranjan Mehta & Associates

Rates Approved by GST Council Export (Zero Rated) Rough Diamond and other Stones Precious Metals & Articles thereof and Imitation Jewellery Job work related to Jewellery Moonga (Coral) 0.25 3 5 5/28 29/07/2017 ©Ranjan Mehta & Associates

Exchange of Old Ornaments New Jewellery A B Jeweller Customer (Unregistered) Old Jewellery/ Gold 29/07/2017 ©Ranjan Mehta & Associates

Definition of Business (17) “business” includes–– (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; 29/07/2017 ©Ranjan Mehta & Associates

Reverse Charge Sec 9(4) The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. 29/07/2017 ©Ranjan Mehta & Associates

Supply of Gold for making new ornaments New Jewellery Making Charges only A B Jeweller Customer (Unregistered) Gold 29/07/2017 ©Ranjan Mehta & Associates

Definition of Job Work (68) “job work” means any treatment or process undertaken by a person on goods belonging to another registered person and the expression “job worker” shall be construed accordingly; Notification No. 11/2017 – Entry No. 26 (i) Services by way of job work in relation to- (c) Cut and polished diamonds; precious and semi-precious stones; or plain and studded jewellery of gold and other precious metals, falling under Chapter 71 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975); Classification of Service Heading no. 9988 : Manufacturing services on physical inputs (goods) owned by others 998892 : Jewellery manufacturing services 29/07/2017 ©Ranjan Mehta & Associates

Supply of Gold for making new ornaments New Jewellery including some diamonds and other stones from own stock Charge : Making Charges + Price of Diamonds and Stones A B Jeweller Customer (Unregistered) Gold 29/07/2017 ©Ranjan Mehta & Associates

Customer (Registered) Wastage New Jewellery Waste – 2% A B Jeweller Customer (Registered) Old Jewellery/ Gold 29/07/2017 ©Ranjan Mehta & Associates

Customer (Registered) Wastage Waste – 2% Charged to Customer -4% New Jewellery A B Jeweller Customer (Registered) Old Jewellery/ Gold 29/07/2017 ©Ranjan Mehta & Associates

Supply of Jewellery to Job Worker Registered? Unregistered? Composition? Gold A B Jeweller Job Worker (Karigar) Jewellery 29/07/2017 ©Ranjan Mehta & Associates

Supply of Jewellery to Job Worker Registered? Unregistered? Composition? Gold A B Jeweller Job Worker (Karigar) Includes other Alloys Jewellery Charges : Making Charges + Alloys 29/07/2017 ©Ranjan Mehta & Associates

Supply of Jewellery to Job Worker Registered? Unregistered? Composition? Gold A B Jeweller Job Worker (Karigar) Jewellery 29/07/2017 ©Ranjan Mehta & Associates

Goods Given to Agents and Brokers C Supplier Recipient A Broker/ Commission Agent 29/07/2017 ©Ranjan Mehta & Associates

Provisions related to Sale on Approval Sec 31(7) Notwithstanding anything contained in sub-section (1), where the goods being sent or taken on approval for sale or return are removed before the supply takes place, the invoice shall be issued before or at the time of supply or six months from the date of removal, whichever is earlier. Sec 2(5) “agent” means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another; Sec 24 (vii) persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise; 29/07/2017 ©Ranjan Mehta & Associates

Goods Given to Agents and Brokers C Supplier (U.P) Recipient (Punjab) A Broker/ Commission Agent 29/07/2017 ©Ranjan Mehta & Associates

Goods Given to Agents and Brokers C Supplier (Rajasthan) Recipient (Punjab) Recipient (Haryana) A Recipient (Delhi) D 29/07/2017 ©Ranjan Mehta & Associates

Transition 29/07/2017 ©Ranjan Mehta & Associates

Credits during transition Availability VAT 1% Available Central Excise 10% VAT 0.5% Composition Not Available Central Excise 1% Deemed Credit To traders only and to the extent of CGST only – 40% 29/07/2017 ©Ranjan Mehta & Associates

Tax payable when and by whom Applicability of the exemption Inputs removed for Job work and returned on or after the appointed day – Sec 141(1) Tax not payable when Goods were removed/ dispatched as such or after partial processing for job work under the existing law prior to appointed day; Such goods are returned within six months or within the extended period (2 months) from the appointed day to the said place of business Tax payable when and by whom Goods are liable for payment of taxes under GST; and Such goods are returned after 6 months or within the extended period from the appointed day If goods are not returned within 6 months or extended period, input tax credit availed in respect of inputs removed will be recovered from the sender Applicability of the exemption Manufacturer (under CGST Act ) / person dispatching the goods (under UTGST Act) and job worker should declare details of inputs held in stock by the job worker on behalf of the sender on the appointed day 29/07/2017 ©Ranjan Mehta & Associates 26

Credit of eligible duties and taxes on inputs / input services during transit – Sec 140(5) CGST A registered person is entitled to take credit in electronic credit ledger of eligible duties and taxes on inputs / input services received on / after the appointed day but the duty / tax has been paid by the supplier under the existing law Condition: Invoice / any other duty / tax paying document recorded in the books of accounts within 30 days from the appointed day SGST A registered taxable person shall be entitled to take credit in his electronic credit ledger of VAT and Entry tax on inputs received on / after the appointed day but tax has been paid by the supplier under the existing law Condition: Invoice / other tax paying document recorded in the books of accounts within 30 days from the appointed day 29/07/2017 ©Ranjan Mehta & Associates

Exports Exports are ZERO RATED as per sec 16 of IGST Act. Bond/LUT may be taken for exports without payment of Integrated Tax. Consignment Exports? 29/07/2017 ©Ranjan Mehta & Associates

How should an ideal taxation law look like? What is Expected Yes or No 1 Nation 1 Tax Rate ? Goods or services are not required to be segregated Provides adequate time and support for transition Does not lead to major changes in business process & systems Should not Increase Business Cost 29/07/2017 ©Ranjan Mehta & Associates

GST in Hand ! GST We Thought About ! One Nation Two Authorities One Nation One Tax Three Taxes Four Rates 29/07/2017 ©Ranjan Mehta & Associates

THANK YOU !!! Ranjan Mehta & Associates Jaipur : S-15, Krishna Mall, Lakshmi Mandir Tiraha, Tonk Road, Jaipur Tel. +91-9672372075+ Email : ranjanmehta21@gmail.com 29/07/2017 ©Ranjan Mehta & Associates