If the state refunds 80-90% of the tax like it did in the VAT regime, the effective SGST would only be 0.25-0.50%
The West Bengal (WB) government is planning to exempt the gems and jewellery industry from state goods and services tax (SGST). While an official communication to this effect is yet to be made, DNA Money has learnt that the government is working on it and will make the decision public in the coming months.
Vandana Yadav, MD, West Bengal Industrial Development Corporation Ltd (WBIDC), said there was a waiver under the value-added tax (VAT) era and the government plans to extend the same under the GST regime.
“It's still to be finalised as paperwork is being done. It is already an area of concern and the government is committed to extending the incentives. Whatever amendments are required will be done to make it happen. I will not be able to give a timeline but it will be done in a very short span,” said Yadav, adding that a commitment has been made during a recent meeting with the gems and jewellery industry players in Mumbai.
The WB government already has gems and jewellery policy that's focused on the micro, small and medium enterprises (MSMEs). Under this policy, said Pankaj Parekh, state president – West Bengal, India Bullion And Jewellers Association Ltd, the government has been offering VAT waiver to players involved in the gems and jewellery business. Other fiscal incentives for manufacturers included capital investment subsidy (SME sector), interest and power tariff subsidy and tax refund, among others. WB is also the first state to permit the exporters to procure gold/silver against bank guarantee during VAT regime and a similar arrangement is likely to be introduced in under GST as well.
According to Sanjeev Agarwal, chairman – Ficci Forum on Gems and Jewellery, various state governments would have an MSME policy allowing for a partial refund of VAT. And in the case of WB government, there is a VAT refund of up to 90% depending on the location of the manufacturing unit.
“There is an 80-90% VAT refund for up to eight years or 75% of capital investment, whichever comes earlier. In this context, where there was a VAT refund against the investment amount, the same will get extended in the GST regime. And I am hoping various other state governments will also do the same,” he said.
However, there is a catch. The WB government has put a cap on the refund based on the capital investment for the MSME sector but there is still no policy for the overall gems and jewellery industry yet. Also, the jewellery sector is not capital-intensive but very labour intensive. It's also very working-capital intensive owing to high-cost raw materials like diamonds and precious metals.
“For the overall gems and jewellery sector they will have to adjust the clause on the maximum cap. Principally, various states would have different levels of VAT refund (covering mainly the MSME sector) to sort of incentivise people to set up shop. And if there is a VAT refund already in place, then logically it should get extended in the GST regime as well,” said Agarwal, adding that owing to the non-capital intensive nature of the industry, a large unit may also get categorised under MSME.
Considering the gems and jewellery fraternity will be submitting a draft with inputs from players across the country for a comprehensive policy in the state of West Bengal, the industry is certain that this topic will get addressed as well.
The overall GST on gems and jewellery sector is 3%, to be shared equally between the Centre and state. Agarwal said any person putting up a new manufacturing plant and getting 80-90% SGST refund. Thus, the effective SGST would only be between 0.25% and 0.50%.
On the possibility of pursuing this incentive with other states, Agarwal said, the topic is very recent and West Bengal government has already made a commitment on the same. “(will take it up) Wherever they have a conducive trade policy for the gems and jewellery industry,” he said.
...& ANALYSIS
- The overall GST on gems and jewellery sector is 3%, to be shared equally between the Centre and state
- The West Bengal government already has gems and jewellery policy that’s focused on the MSMEs
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 "Gems & jewellery")
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