BUSINESS STANDARD | 4 August 2016
The implementation of the Goods and Services Tax (GST) Bill is set to make household jewellery 18% cheaper, which in turn will discourage sales of used ornaments freely to jewellers.
Jewelers’ will not get input credit on gold procured through melting of used jewellery. Hence, they will prefer to pass on the loss to customers.
Since, GST is mulling 18% tax on gold ornaments, jewellers will get 18% lower input credit. On passing 18% lower input credit, customers will get lesser amount equivalent to the tax. Hence, customers will get 18% lower realisation from their used gold jewellery, said Surendra Mehta, secretary, India Bullion and Jewellers Association(IBJA).
Gold recovery through melting of used jewellery stands between 5% and 10% in India, depending upon price volatility. In case of price rise, quantity of used jewellery increases. Scrap jewellery collection declines with fall in gold prices.
Customers are bound to get discouraged from used jewellery sales as their realisation will fall 18% following the GST rollout. The realisation will go down further in case customers are not aware of current prevailing gold price, said Prithviraj Kothari, Managing Director, RiddiSiddhi Bullions.
Interestingly, jewellers might save more through unethical practices, an industry veteran said. Since most jewellery sales take place in distress, jewellers might take advantage of the situation in the name of GST, he added.
Jewellers avail input credit from banks as working capital in commensurate with gold collected through melting of scrap jewellery.