Jewellery may get more expensive

The proposed changes to the minimum alternate tax (MAT) and tax deducted at source (TDS) as envisaged in the direct tax code has become a cause for concern for the gems and jewellery industry.

While MAT will now be levied at 2% on gross assets instead of book profits as earlier, the payments for supply of goods will attract a deduction of 10% tax, according to the code.

Speaking at a meet organised to object these modifications, Ashok Minawala, chairman of the projects committee of the All India Gems and Jewellery Trade Federation, said such procedures will affect the consumer as the cost of goods will go up. “It will surely pile up in the end of the day to go to the consumer, which we are not at all ready to do,” he said.

A jeweller normally earns a 1-1.5% of net margin on gold and 5% net margin on studded jewellery. “When the prices of gold push up, margins shrink… beyond a point, it is not sustainable for the jeweler,” said Dilip Lagu, a jeweller.

“Prices may go up by 5-10%,” said Arun Chintamani, chairman of the Chintamani group.
The federation had made a representation to the ministry of finance on December 15, to seek changes in the direct tax code, saying it will lead to closure of the jewellery industry.

The federation has also opposed the search and seizure provisions in the code, which authorises the investigating officer to seize any stock in trade of bullion, semi-precious stones and jewellery.