Mumbai: The gem and jewellery industry has sought GST of 1.25 percent from the government for the sector besides zero duty on rough diamond imports, cut and polished diamonds exports and coloured gemstones.


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"In a representation, we have suggested the government to continue with nil duty on import of rough diamond and exports of cut and polished diamonds. The industry fears that any adverse tax structure may lead India to lose its leadership position in the diamond cutting and polishing industry," Gem & Jewellery Export Promotion Council (GJEPC) chairman Praveenshankar Pandya told reporters here.


He said that after a survey conducted over nine months across 7,000 registered members, the industry body has arrived at the conclusion that a recommendation should be sent to the government seeking exemption of gems and jewellery sector under GST.


The All India Gems and Jewellery Trade Federation (GJF) has also raised concerns on the proposed GST rate of 4 percent and has proposed a rate of 1.25 percent instead for the gems and jewellery sector.


GJF sought minimal GST rates even as the GST Council commenced a crucial 3-day meeting to set rates.


Chairman of GJF, Sreedhar G V said, gold is a very sensitive product and cannot be taxed at higher levels. While the G&J industry is now gearing up for the forthcoming GST era, the proposed rate of 4 percent will hamper the growth of the industry and turn into unorganised sector.


"This will result in drop in tax compliances and revenue and will also encourage smuggling. There is an entire precedent on VAT collections in the past and 1 percent was the highest revenue collector from G&J industry.


"Therefore, GJF has proposed that the GST rate for the gems and jewellery sector should be kept at 1.25 percent, if the government expects the industry to get organised," he said.


As the introduction of GST will be a landmark indirect tax reform (to replace present indirect tax structure), GJF has proposed that the GST Council should consider the recommendations of the sub-committee of High Level Committee (HLC) constituted by the government to deliberate on levying excise duty on the unorganised gems & jewellery sector.


At present, gems and jewellery exports are effectively zero rated. Hence, any element of tax in exports is required to be rebated. As regards VAT, it is typically charged at the rate of 1 per cent on the sale price by almost all the states, Pandya said.


GJEPC said export transactions should not be subjected to any effective GST. All related consumption of raw materials, inputs and input services such as input of rough diamonds gold/silver/platinum, at the input level should continue to be free from levy of any import duty/GST.


India consumes 7 percent of world diamond produce, and 93 percent of India's diamond production is exported, Pandya said.