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TMI BlogGEMS & JEWELLERY INDUSTRY UNDER GST REGIME (PART-3)X X X X Extracts X X X X X X X X Extracts X X X X ..... GEMS & JEWELLERY INDUSTRY UNDER GST REGIME (PART-3) - By: - Dr. Sanjiv Agarwal - Goods and Services Tax - GST - Dated:- 25-1-2017 - - Job work and GST Gems and jewellery sector is highly labour intensive and lot of work is done on a job work basis involving manual labour. The principal manufacturer has the option to send taxable goods without payment of GST to a job worker and bring it back, after processing, to any of his own place of business, for supplying such goods on payment of GST or export it. The principal also has the option to directly supply final products to end customers on payment of GST or export from the premises of job worker itself, subject to fulfillment of applicable conditions. GST credit is allowed in case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f direct receipt of inputs or capital goods by the job worker, subject to receipt of goods back by the principal within specified period i.e., one year/ three years. Under the present service tax, job works in relation to cut and polished diamonds and gemstones, or plain and studded jewellery of gold and other precious metals, falling under Chapter 71 of the Central Excise Tariff Act, 1985 are exempt from levy of service tax under entry No. 30 of Notification No.25/2012-ST. Transactions between Head office and Branch offices located outside/inside India Services provided to overseas branch would not be eligible as export of services due to specific exclusion for such transactions in the definition of export of service . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This is similar to the existing provisions for export of service to overseas branches. Model GST law provides that an establishment of a person in India and any of his other establishments outside India shall be treated as establishments of distinct persons. Accordingly, supply of services to the branch would not be eligible as export of services, and as such, benefits available to exporter would be restricted to the supply of services to other persons. This could entail reversal of input credits as such supply would be treated as non-taxable and not as zero rated. However, definition of import of service does not specify such exclusion. Logically, definition of import of service also excludes services imported from overseas branch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but clarity should bring for better understanding. Supply provided to domestic branch in other States shall be considered as distinct person. Accordingly, IGST would be leviable on such supplies. Domestic / SEZ Supply For units located in SEZ having operations across India and providing supply of services to customers located across India, the issue would arise as to where to pay GST and whether this would require splitting of invoices based on various locations of the service provider or the service recipient. For this purpose, the model GST law has prescribed the requirement of determination of the location from where the services are provided and the place of supply of such services, so that GST may be paid to the appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opriate Government. In the context of determination of the location from where services are provided, it provides clarity by defining the term location of supplier of service and the place of supply of services is determined based on the location of recipient of service . With the assistance of these terms, the appropriate location for billing and the type of GST to be paid can be determined. Gems Jewellery sector is demanding exemption from IGST for movement of goods and services in different SEZs across different States. Units located in SEZ Various benefits and incentives have been provided to the SEZ units which are engaged in the manufacturing and exporting of gems and jewellery in the SEZ area. Many tax and dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y incentives have been offered to SEZ units in the current SEZ policy to help them attract investments, and in turn, generate employment and boost exports. Incentives offered in the present SEZ related policy to SEZ units include exemption from Customs/Excise Duties besides exemption from CST and Service Tax. Comparison between taxability under existing indirect tax laws and the model GST are as follows: Taxes SEZ units Present regime GST regime Customs Duty Exempt Basic Custom Duty Upfront exemption may continue Excise Duty Service Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CST/VAT Upfront exemption / refund Payable (subsequently refundable) As per revised Model GST law, if a SEZ unit is receiving zero rated supply, it shall be eligible to claim refund of IGST paid by the registered taxable person on such supply. But again this will lead to blockage of working capital which may lead to increase in price. Supply of goods and/ or services to or by a SEZ unit, shall be deemed to be a supply of goods and/or services in the course of inter-State trade or commerce. Accordingly, on supply of goods and/or services to or by a SEZ unit shall attract IGST at the prescribed rate but it may not exceed twenty eight percent as proposed now. Exports In case of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xport of products, raw material and capital goods are purchased either domestically or exported. Presently, these are allowed to be sourced duty free under EPCG schemes / Advance Authorization schemes but in GST regime, IGST would be payable and later refund sought. This may impact working capital as tax would be first paid and then refunded as against zero duty facility. Merchant exporters will be required to pay IGST and seek refund after exports as against current exemption from VAT or CST. Merchant exporter, like manufacturer exporter should be allowed to export under a bond. Inter-State or Intra-State Supplies? Any supply of gems and jewellery where the location of the supplier and the place of supply are in different Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es then, such supply shall be considered as inter-state supply, accordingly, provisions of IGST will be applicable. On other hand, any supply where the location of the supplier and the place of supply are in same State then, such supply shall be considered as intra-state supply. (To be continued .......) - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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