Page 11 - Banking Finance October 2019

GST UPDATE

GST

NEWS
NEWS
NEWS
NEWS
NEWS

Government anticipates GST rate reduction likely to provide much needed im-
GST shortfall of Rs 40,000 petus to the society
crore 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 Government of India is expect- the industry. Blocked working capital worth Rs
ing a shortfall of around Rs 40,000
1,500 crore in almost defunct job-work diamond
crore in the GST collections over
polishing units is expected to be released even
what has been budgeted for 2019- as diamantaires are likely to issue fresh orders
20. This could put pressure on the
compensation that states are eligible to these units, following GST relief.
for in case the tax growth falls be- A similar benefit is set to accrue in case of cut
low 14% during the year. and polished semi-precious stones where the GST rate has been pared to 0.25%
A state finance minister said the Cen- from 3%. In the diamond industry, imported or sourced rough precious stones
tre had informed the GST Council, are sent for polishing by diamantaires to either their own units or outsourced
which met in Goa on Friday, about to smaller units doing job work. It was this outsourcing that had attracted a
the expected shortfall at a time when five per cent, against which the diamond industry had been making representa-
economic growth has slowed down. tion to the government for reduction.
Most states were, however, optimis- "In terms of job work service, the government has reduced the rate of GST from
tic that the government will find a five per cent to 1.5% on supply of job work services in relation to diamonds. The
way to meet the compensation re- measures will provide impetus to the sector, help upscale manufacturing and
quirements; otherwise, they may be augment exports of Gems & Jewellery from India.
forced to borrow from the market.
The Government has given a positive stimulus to the economy and the industry
Economic growth has slowed in the facing challenging times due to slump in global demand and also due to low
country due to a string of factors and domestic consumption," said Pramod Kumar Agrawal, Chairman, Gem and
latest data showed that GDP growth
slumped to a six-year low of 5% in the Jewellery Export Promotion Council (GJEPC).
April-June quarter, hurting prospects According to Dinesh Navadia, regional chairman-Gujarat for GJEPC, blocked work-
for higher revenues. As part of the ing capital worth Rs 1,500 crore could get released with a reduced GST rate on
GST bargain, the Centre had agreed job work since diamantaires would now be willing to opt for more outsourcing.
to compensate states for five years, So far, demonetisation, coupled with GST, has led to liquidity crisis, with a five
if the annual increase in revenues per cent rate on job work forcing diamantaires to reduce outsourcing and go
was less than 14%. for their own polishing units, since the former attracted more tax.

BANKING FINANCE | OCTOBER | 2019 | 11