In a major relief for diamond jewellery exporters, the government is planning to waive the three per cent Integrated Goods and Services Tax (IGST) levied on unsold precious ornaments brought back to India from overseas exhibitions.
As a practice, exporters carry large quantities of diamond jewellery for displaying in exhibitions abroad, for which they have to pay three per cent IGST levy. Since these ornaments are not carried based on pre-orders from foreign customers, some of them are sold in the exhibition itself, while the remaining are brought back to India. On such imports, jewellers need to pay another three per cent towards IGST. This means that merchants end up paying a total of six per cent IGST on unsold precious ornaments that come back to India from foreign exhibitions. Such high rates of IGST have hit jewellers’ sales promotion in international events, which have the potential to boost business in a very big way. The double incidence of IGST has forced Indian jewellers to carry limited quantities of products for display abroad.
“We have requested the Ministry of Finance to waive IGST on unsold diamond jewellery brought back to India from international events. We are pursuing the issue very aggressively and expect some progress on it soon,” said a confident senior official in the Ministry of Commerce on the sidelines of the Kimberley Process Intersessional Meet 2019 in Mumbai on Friday. Relaxing norms for diamond jewellery exporters, the Directorate General of Foreign Trade (DGFT) on Thursday issued a clarification through which central excise duty of one per cent was waived off on the jewellery re-imported into India during the pre-GST regime which was exported earlier either on consignment basis or for participation in overseas exhibitions.
Data compiled by the industry body, Gems and Jewellery Export Promotion Council (GJEPC) showed total return consignment, which jewellery industry categorises as re-imported ornaments, contributed to around 20 per cent of total ornaments shipped out of India during the financial year 2018-19. The GJEPC data showed total gems and jewellery gross exports declined by 3 per cent to $39.68 billion for the financial year 2018-19 compared to $41 billion for the previous year.
Considering the return consignment of $8.7 billion for 2018-19 and $8.3 billion for the previous year, India’s net gems and jewellery exports were pegged at $31 billion for the financial year 2018-19 versus $32.7 billion for the previous year. The gems and jewellery industry has been demanding IGST exemption on unsold inventory for quite some time now.
The IGST exemption would help Indian exporters carry more ornaments for display in overseas event resulting into an increase in overall exports from India. There will be no impact on government’s tax collection, said Alok Vardhan Chaturvedi, Director General, the Directorate General of Foreign Trade (DGFT). Sabyasachi Ray, Executive Director of the GJEPC believes that the IGST exemption would revive sentiment in the diamond jewellery export sector which will benefit the industry in a big way.