With 25% of jewellery sales still done using cash, the industry is waking up to a long-term impact on industry volumes
The gems and jewellery industry is up for some tough times ahead.
Coming curbs on cash purchases, widely seen in jewellery purchases in rural areas, a likely high Goods and Services tax rate and troublesome GST compliance issues relating to registering thousands of independent and semi-literate artisans handing gold ornaments are some of the key factors that would keep the morale of the industry down.
"When the curbs on cash purchases beyond Rs 2 lakh are imposed with effect from April, not only gems and jewellery but several sections of the economy would be impacted. We should remember that 60% of the population which is dependent upon agriculture doesn't pay income taxes and prefers dealing mostly in cash at every level of handling of agri produce," said Gems & Jewellery Trade Federation's former chairman Bachhraj Bamalwa.
Welcoming the government's move to promote electronic payments, the jewellery industry sees curbs on cash deals and high services charges for using cards as likely dampener at a time when the jewellers are staring at the prospect of GST tax at rates could be much higher than present VAT rates.
"We are in favour of promoting digital payments but the high service charges of 1-3% by the credit card service providers eats into our profits on a net level. Such services charges must come down," said Nitin Khandelwal, chairman of GJF, on the sidelines of the trade body's Preferred Manufacturers of India regional meet.
With 25% of jewellery sales still done using cash, the industry is waking up to a long-term impact on industry volumes.
"Sales are down 20% from earlier normal levels since demonetization was implemented. We are calling this the new normal," Khandelwal said.
Apart from battling curbs on cash purchases, the jewellery industry is busy making numerous presentations to the government to keep GST rates closer to the current VAT rate of 1% in most states.
"Unless GST rates are reasonable, there would be risk of non-compliance by the industry and risk of resistance by consumers to pay high taxes. If 4-6% GST is imposed on the industry, as per Arvind Subramaniam report recommendation against our demand for 1.25% based on a current VAT rate of 1%, there would be chaos in the industry," said Sankar Sen, Director, GJF and east zone chairman.
The industry needs to register 'karigars' as they would be handling significant quantum of the precious metal inventory needing maintenance of computerised records.
"Artisans who would be charging up to a threshold limit of Rs 20 lakh of making charges for the jewellery needs to be registered. Such payments wouldn't be made to individuals but usually to a head artisan who in turn would be making payments to several people working under him each specialised in specific areas of jewellery making. We have demanded that this limit to Rs 50 lakh," said Sen.
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