Jewellery stocks like Titan Co. Ltd, PC Jeweller and Gitanjali Gems among others, surged up to 17 per cent on Monday after the GST (Goods and Services Tax) council fixed a 3 per cent tax rate on gold.
The GST Council had, in May, finalised four tax slabs – 5 per cent, 12 per cent, 18 per cent and 28 per cent – under the GST, which is expected to be launched from July 1.
Many were expecting that gold would be taxed at the lowest slab of 5 per cent, but were pleasantly surprised, when Finance Minister Arun Jaitley announced that gold, gems, gold jewellery and processed diamonds would be taxed at a lower tax rate of 3 per cent. Rough diamonds, will be taxed at 0.25 per cent.
“ The government rightly kept the overall tax burden low in the industry, keeping in mind the unique characteristics of the gems and jewellery sector, the kaarigar and small jewellers,” said Nitin Khandelwal, chairman of All India Gems and Jewellery Trade Federation.
Analysts say a 3 per cent GST on top of the existing 10 per cent import duty will only marginally drive up prices, which the jewellers would directly pass on to customers.
“At present, gold is taxed at 2-2.5 per cent (4 per cent in Kerala) and this marginal increase will not affect the players involved in the industry in a big way. This will help bring in standardisation of rates across the country,” said Prathamesh Mallya, chief analyst, non-agri commodities at Angel Broking.
Gold demand in India in 2016 slumped 21 per cent to 675.5 tonnes, according to the World Gold Council, due to the government's move to ban high value currency, a jewellers' strike early on and the mandatory requirement of pan card for purchases over Rs 2 lakh. In the quarter-ending March 2017, demand of gold increased 15 per cent to 123.5 tonnes.
Analysts note that the GST will increase paper work and compliance, which would particularly hurt the small and unorganised players.
On Monday, shares of Tata-owned watches to jewellery maker Titan jumped 17 per cent to close at Rs 552.40, PC Jeweller surged more than 9 per cent to 550.25 and Gitanjali Gems rose close to 3.5 per cent to Rs 69.30.
Several others like Tara Jewels, Thangamayil Jewellery and Renaissance Jewellery also rose 2 per cent to 5 per cent.
