THE GEM and Jewellery Export Promotion Council (GJEPC), the apex body of the industry in India, has been representing the gem and jewellery sector’s policy concerns and issues to the government with an objective to boosting exports. In a Board of Trade meeting held on 12 September 2019, GJEPC Chairman Pramod Kumar Agrawal urged the government to implement several key policy recommendations.

Shortly thereafter, in a major relief to the gems and jewellery industry, Finance Minister Nirmala Sitharaman announced measures to boost exports from the country.

Pramod Kumar Agrawal, Chairman, GJEPC, said, ‘With great pleasure, I would like to thank and acknowledge the positive announcements made by the Hon’ble Finance Minister. I am glad that the government has understood the concerns of the gems and jewellery sector and come up with various measures to boost exports and facilitate trade.

‘The gems and jewellery sector had been suffering from credit crunch and blockage of capital. Expansion of the scope of ECIS by ECGC to banks lending to exports is an encouraging step towards resolving the finance woes of the sector. Gems and jewellery is one of the special four sectors chosen for organizing mega shopping festivals in four cities prior to March 2020, the other three being handicrafts/yoga/tourism, textiles and leather. This will not just give an impetus to sales to foreign tourists, but also propel exports for the sector.

‘Reimbursement of taxes and duties for export promotion is an encouraging step towards ease of doing business and the step towards expediting export shipments will enhance sectoral exports.’


The 37th meeting of the GST Council, held under the Sitharaman’s chairmanship on 20 September 2019 in Goa, resulted in some key decisions pertaining to the gems and jewellery sector.


Reduction in GST rate from 5 per cent to 1.5 per cent on supply of job work services in relation to diamonds

Explanation and impact:

On 25 January 2018, the GST rate on cut and polished diamonds and gemstones had been reduced from 3 per cent to 0.25 per cent, while GST rate of 5 per cent (job work charges)/18 per cent (others) applied on input services, leading to accumulation of ITC (input tax credit) qua domestic supplies. The industry has posited that the benefit of GST refund owing to inverted duty structure, in terms of Section 54 of the CGST Act, is being restricted only to inputs and does not apply to input services. The Council had been suggesting that the existing situation could be remedied by prescribing GST rate of 0.25 per cent across all input services consumed by manufacturers/traders in diamonds and gemstones.


Three per cent to 0.25 per cent on cut and polished semi-precious stones.

Explanation and impact:

On 25 January 2018, the GST rate on cut and polished diamonds and precious stones was reduced from 3 per cent to 0.25 per cent. Semiprecious stones, like other precious stones, are also part of the raw material required by the industry. Industry representatives had argued that keeping two different GST rates for cut and polished precious and semi-precious stones, when basic customs duty on both is same, would simply be unjust to small exporters. This move will reduce the burden of working capital blockage and enable exporters to compete in international markets.


Exemption from GST/IGST

  • Supply of silver/platinum by specified nominated agency to exporters for export of jewellery
  • At the time of import on silver/platinum by specified nominated agencies
Explanation and impact:

Three per cent IGST exemption was granted to supply of gold by nominated agencies in December 2018. The industry, since then, had been asking for the extension of the same benefit to other precious metals like silver and platinum, which are procured as raw materials for manufacturing jewellery for export purposes. With this new move, exporters will also be able to procure GST-free silver and platinum from the nominated agencies.

Inclusion of Diamond India Limited (DIL) in the list of nominated agencies eligible for IGST exemption on imports of gold/silver/platinum so as to supply at nil GST to jewellery exporters

Explanation and impact:

The Council had been petitioning for this move since all public sector nominated agencies were given the benefit of 3 per cent IGST exemption on supply of gold to exporters. DIL had been left out. The industry had contended that this was the only nominated agency left out from the list, and that it had been actively catering to the demand of small and medium jewellery exporters. The inclusion of DIL will help them supply GST-free gold to all exporters across the country.


A company which does not opt for the concessional tax regime and avails the tax exemption/incentive shall continue to pay tax at the preamended rate. However, these companies can opt for the concessional tax regime after expiry of their tax holiday/exemption period. After the exercise of the option, they shall be liable to pay tax at the rate of 22 per cent and the option, once exercised, cannot be subsequently withdrawn. Further, in order to provide relief to companies which continue to avail exemptions/incentives, the rate of Minimum Alternate Tax has been reduced from the existing 18.5 per cent to 15 per cent.

Explanation and impact:

The Council, in its representations to the government, had contended that imposition of MAT had resulted in a fall in the interest of investors in SEZs across the country and severely impacted brand India’s image worldwide. A request was made to immediately remove MAT to revive investors’ interest in SEZs, attract manufacturers to SEZs, which are seeing frequent exits of units, and support small and medium enterprises in SEZs.

In order to promote growth and investment, a new provision has been inserted in the Income Tax Act with effect from FY 2019-20 which allows any domestic company an option to pay income tax at the rate of 22 per cent subject to the condition that they will not avail any exemption/incentive. The effective tax rate for these companies shall be 25.17 per cent, inclusive of surcharge and cess. Also, such companies shall not be required to pay Minimum Alternate Tax.


With the aim of boosting credit to the export sector, the following changes have been announced by the government:

  • Enhancement of the sanctioned limit, for classification of export credit under PSL, from 250 million per borrower to400 million per borrower.
  • Removal of the existing criterion of ‘units having turnover of up to `1 billion’

The Council had been repeatedly and aggressively petitioning the government on the severe liquidity crunch being faced by MSME member exporters. The majority of the borrowers (about 80 per cent) in this sector are MSME customers. The matter was duly escalated before the commerce and industry minister on 7 June 2019 in a meeting held under his chairmanship to discuss issues related to export credit.

With the removal of the turnover criterion, most MSMEs in the sector will now be eligible for priority sector credit benefits. The Council has been strongly advocating that timely and efficient availability of export credit is critical for any trade activity and is one of the key drivers that boosts exports (notification – RBI/2019- 20/66 FIDD.CO.Plan.BC.12/04.09.01/2019 -20 September 20, 2019 has been issued).

In addition, some key policy issues have been resolved by the GJEPC in the recent past. Some of these are outlined here.


A large number of exporters were issued pre-notice consultation letters proposing issue of demand of an amount equal to the IGST not paid under bond/LUT on re-import of unsold gems and jewellery exported for display in foreign exhibitions/export promotion tour/on consignment basis after 1 July 2017 on the grounds that at the time of reimport, the exporter was required to pay an amount equal to the integrated tax not paid at the time of export under Sr. No. 1 (d) of Notification No. 45/2017-Customs dated 30.6.2017, as the exports had been done under bond/LTU without payment of IGST.

Explanation and impact:

Issuance of Circular No.17/2019- Customs dated 19 June 2019 has provided much–needed relief to exporters. Gems and jewellery Solitaire [ 11 exports are heavily dependent on export of such goods, which are reimported/re-exported many times before being sold. This move has helped exporters increase exports, employment and inflow of foreign currency.


Earlier, bonds were credited and closed only after all the imported goods (meant for export after prescribed value addition/wastage norms) had been used and exported as finished goods. These bonds and corresponding bank guarantees sometimes remained outstanding in full due to unavailability of the facility of partial credit against the quantity of import of gold for which export obligations had been fulfilled. This hindered the expeditious discharge of bonds, leading to capital blockage for the exporter. Thus, in turn, burdened exporters unnecessarily.

Various representations were sent to various departments by GJEPC to suggest that partial crediting of bonds and bank guarantees, submitted at the time of import of gold, may also be facilitated in proportion to the export obligations fulfilled for which necessary prescribed documentation evidencing the same had been provided to the jurisdictional customs authorities. The matter was examined in consultation with the Directorate General of Systems. In order to address the issue, a new provision has been developed in ICES 1.5 to proportionately credit the bond and bank guarantee online as and when the exports are being made, partially against the said bond and bank guarantee. The procedure and the timeline prescribed vide Circular No. 25/2018-Customs dated 08.08.2018 will apply mutatis mutandis to partial discharge of bonds.

Explanation and impact:

This policy will provide manufacturers and exporters with adequate working capital.


Exporters of gold/silver/platinum jewellery and articles thereof, including mountings and findings, may obtain gold/silver/platinum as an input for export product from Nominated Agency, in advance or as replenishment after export in accordance with the procedure specified in this behalf. Replenishment of gold/silver/platinum will be subject to customs notification No. 57/2000- Customs dated 8.5.2000. Issuance of notifications from Customs Notification No. 16/2015-2020 dated 2 September 2019 provides clarification on the same.

Explanation and impact:

Exports were declining as duty-free replenishment was not available to exporters for jewellery sold at exhibitions abroad, so exporters were not selling, but this move is expected to boost exports. It was a longpending demand and logical as IGST and ITC refunds provide a refund of GST while replenishment gives the benefits of basic customs duty. The two are mutually exclusive.


Several goods are taken out of India on consignment basis for exhibitions or other export promotion events. These goods are sold only when approved by the prospective customers abroad. Unsold goods are brought back to India. Exporters of these items were facing problems due to lack of clarity on the procedure to be followed under GST at the time of taking these goods out of India and at the time of their subsequent sale or return to India. Taking cognizance of these problems and in order to help exporters, the Central Board of Indirect Taxes and Customs (CBIC) has now issued a comprehensive clarification in this regard vide Circular No. 108/27/2019-GST dated 18 July 2019 and Circular No.21/2019-Customs dated 24 July 2019.

Explanation and impact:

In this regard, Delhi customs had issued show-cause notices to 116 exporters for payment of IGST. Based on regular follow-ups by the GJEPC, Commissioner Customs, Delhi, had personally conducted hearings of exporters. As a result, nearly all the notices have been resolved.

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