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Nachiket Kelkar
Nachiket Kelkar

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GST cut to ease working capital pressure of diamond exporters

diamond-reuters20118 GST on diamonds and precious stones to be reduced to 0.25 per cent from the existing 3 per cent | Reuters

Diamond exporters are set to be the biggest beneficiaries of the rate cuts announced by the GST (Goods and Services Tax) Council this week. The GST Council on Friday cut rates on 83 goods and services (29 products and 54 types of services) effective January 25.

The GST on diamonds and precious stones will be reduced to 0.25 per cent from the existing 3 per cent. This, experts say, will free up working capital in an industry, where bulk of the raw material is imported and much of the cut and polished diamonds are exported back.

“This cut in GST rate will definitely help the industry to grow further. Given the high price of the products, where about 80 per cent to 95 per cent of the content is imported component and more than 90 per cent being exported, this will be a great boost to the Indian Gems and Jewellery industry,” said Pramod Agarwal, chairman of the Gems and Jewellery Export Promotion Council.

According to GJEPC's provisional data, over April-December 2017, India imported rough diamonds worth $14.09 billion, up 11 per cent year-on-year. Exports of cut and polished diamonds rose 2 per cent to almost $17.19 billion. The net gems and jewellery exports over April-December stood at $24.89 billion. 

Earlier, the government had levied 0.25 per cent GST on rough diamonds and 3 per cent on polished stones. The GST levied during the movement of diamonds is refunded only after the finished product is exported and this GJEPC had pointed out earlier was blocking almost Rs 5,000 crore of the working capital of the industry. The council had also made representations to the finance minister with regards to the complex GST structure on the sector. 

With the latest GST rate cut, much of this working capital will now be freed and would thus benefit thousands of small and large firms in the industry.

“This move will certainly support the SMEs (small and medium enterprises) of the sector and small players including brokers, agents and traders to function smoothly without blockage of working capital,” said Agarwal.

India exported gems and jewellery worth $43 billion in 2016-17 and has set a target of $60 billion exports by 2022.

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Topics : #GST

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