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Allowing jewellers to buy old jewellery from customers for recycling without incurring GST of 3 per cent is seen to encourage smuggling and create a divide between large and small organised jewellers.
Surendra Mehta, Secretary, Indian Bullion and Jewellers Association, said jewellers can buy old jewellery from customers without paying GST but smaller jewellers with a turnover of less than ₹75 lakh per annum would incur GST of just 1 per cent when they sell new jewellery by recycling it.
Whereas, a jeweller with turnover of over ₹75 lakh has to pay GST of 3 per cent while buying bullion and levy GST of three per cent on customers while selling the jewellery, he added.
“This apart, the move would also encourage smuggling, as the margin would increase with customs duty of 10 per cent and GST of 3 per cent. We are planning to write to the Finance Ministry soon,” he said.
The Finance Ministry on Thursday clarified that the sale of old jewellery by an individual customer to a jeweller will not attract 3 per cent GST.
Furtherance of businessSale of old gold by an individual for a consideration cannot be termed to be in the course of furtherance of his business (as selling old gold jewellery is not the business of the said individual), and hence does not qualify to be a supply per se, the Ministry clarified.
Tanya Rastogi, Director, Lala Jugal Kishore Jewellers, said when a jeweller buys bullion through the proper channel he incurs 3 per cent GST and gets credit for it. However, when a jeweller buys old jewellery from customers he will not get any GST credit as there is no GST involved.
To that extent, she said, cash for old jewellery will become more expensive and this will encourage customers to exchange old jewellery for new ones. Lala Jugal Kishore Jewellers is among the leading players in North India.
Somasundaram PR, Managing Director, World Gold Council, said the new tax regime, if enforced strictly, can bring down smuggling with proper data analytics.
With the rollout of GST, he said, it is the right time for the government to bring down the import duty of 10 per cent on gold to discourage smuggling and work on a transparent mechanism for uniform gold prices across the country.
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