GST rate reduction likely to provide much needed impetus to the society

The GST rate reduction from five per cent to 1.5% in job work for diamonds is expected to provide much-needed impetus to the industry. Blocked working capital worth Rs 1,500 crore in almost defunct job-work diamond polishing units is expected to be released even as diamantaires are likely to issue fresh orders to these units, following GST relief.

A similar benefit is set to accrue in case of cut and polished semi-precious stones where the GST rate has been pared to 0.25% from 3%. In the diamond industry, imported or sourced rough precious stones are sent for polishing by diamantaires to either their own units or outsourced to smaller units doing job work. It was this outsourcing that had attracted a five per cent, against which the diamond industry had been making representation to the government for reduction.

“In terms of job work service, the government has reduced the rate of GST from five per cent to 1.5% on supply of job work services in relation to diamonds. The measures will provide impetus to the sector, help upscale manufacturing and augment exports of Gems & Jewellery from India.

The Government has given a positive stimulus to the economy and the industry facing challenging times due to slump in global demand and also due to low domestic consumption,” said Pramod Kumar Agrawal, Chairman, Gem and Jewellery Export Promotion Council (GJEPC).

According to Dinesh Navadia, regional chairman-Gujarat for GJEPC, blocked working capital worth Rs 1,500 crore could get released with a reduced GST rate on job work since diamantaires would now be willing to opt for more outsourcing. So far, demonetisation, coupled with GST, has led to liquidity crisis, with a five per cent rate on job work forcing diamantaires to reduce outsourcing and go for their own polishing units, since the former attracted more tax.