GST, Cash Flow Issues Take Glow Out of Gem, Jewellery Sales

Sale of gem and jewellery is likely to drop 10-15 per cent in the current financial year due to Goods and Services Tax (GST), high gold price and cash flow issues, according to N Anantha Padmanaban, Chairman, All India Gem and Jewellery Domestic Council.

In 2016-17, the sale of gem and jewellery was nearly Rs 3.60 lakh crore, which increased to Rs 4 lakh crore last year. However, this fiscal, ‘we expect it to decline to Rs 3.50-3.60 lakh crore,” he told.

“We were hoping that GST will benefit the industry but it has not as customers need to pay 3 per cent GST as against 1 per cent Value Added Tax (VAT) before the GST regime,” he said. A customer need to pay an additional Rs 60-70 per gram of gold due to GST, he added.

However, one good thing about the GST is that it has brought many players in the unorganised sector into the organised sector. Three-to-four years ago, 85-90 per cent of the sale was through unorganised players as against about 70 per cent now. There are nearly four lakh retail stores across the country with Tamil Nadu having the maximum numbers, he said.

Cash flow

On the the issue of cash flow, Padmanabhan said problems involving a couple of city-based jewellers affected the industry in Tamil Nadu. However, after the Nirav Modi issue, the entire industry was affected with banks refusing to provide finance. The working capital requirement ranges between Rs 10 crore and Rs 75 crore per year depending on the size of the jeweller, he said. “The attitude of bankers is affecting the entire industry, and in turn affecting sales,” he said.

“After the elections, we plan to meet all the banks to sort out the problem,” he said.

High gold price, Padmanaban said, was mainly due to the Dollar fluctuation. This is a big concern for the industry, he added.

Non-availability of skilled workers is another major problem that is affecting the industry. Next generation workers are not willing to join the industry but prefer jobs in the IT or manufacturing. “We plan to take up with the government to set institutes to train workers in gem and jewellery,” he said.

Story & Image Courtesy: Hindu Business Line