GST concerning the diamond job work was brought down to 1.5% from 5%. This rate cut has given much-needed relief to the diamond industry. Diamantaires outsource the imported rough precious stones to either smaller units who perform diamond job work or to their own units.
Before the rate cut, this outsourcing activity attracted a GST charge of 5%. The diamond industry had made several representations to the government requesting a rate reduction.
A working capital worth around Rs 1,500 was blocked in almost non-functional diamond polishing units. However, with the rate cut, there is anticipation about the blocked working capital getting released since diamantaires might probably dispense new orders to these polishing units, following the GST rate revision.
A similar rate cut has been announced concerning polished and cut semi-precious stones too. Previously, 3% was the GST; the rate has now been revised to 0.25%.
The previous GST charges on diamond job work compelled the diamantaires to bring down outsourcing because they were attracting higher GST charges. Nevertheless, with the GST rate cut, outsourcing is set to increase.
In FY 2018-19, there was a marginal increase of 0.39% with regards to exports of polished and cut diamonds. In FY 2017-18, exports stood at $23.72 billion, in FY 2018-19, it increased to $23.82 billion. The exports related to polished and cut diamonds are set to grow further with the new GST relief the GST Council has announced in its 37th GST Council meeting.
Previously, 60% to 70% of the polishing requirements were outsourced to job work units by the diamantaires. However, post demonetisation and implementation of GST, the percentage of outsourcing came down to 30%. Due to decreased outsourcing, business for the polishing units also reduced. However, the outsourcing percentage is likely to increase after the GST rate reduction.
For any clarifications/feedback on the topic, please contact the writer at firstname.lastname@example.org