CBEC issues FAQs on Gems & Jewellery under GST

Question 1: Whether advertising and communicationmaterial (banners/ hoardings/ posters) provided to distributorswould be treated as supply in the course of business by thecompany thereby not requiring any reversal of ITC.
Answer:(a) Where the material is provided free of cost:This would not amount to a supply and hence no tax ispayable on such transaction and in such a case creditavailed by the company would need to be reversed inaccordance with section 17(5) of the CGST Act, 2017.(b) Where the material is provided for a consideration:This would amount to a normal supply.

Question 2: Currently Banks do not pay any VAT on importof precious metals. Banks/ nominated agencies pay onlycustoms duty on imports. In the new regime of GST, will the
Banks have to pay IGST while importing
Answer: Yes, 3% IGST is payable on all imports of preciousmetals in addition to the basic customs duty. IGST paid canbe taken as input tax credit by the banks.

Question 3: Banks import gold / silver on consignment basiswherein the ownership of the metal is with the supplier ofthe bullion which maybe an overseas entity. Is the overseasentity required to have GST registration because currentlythey do not file returns and are governed by multi-nationtreaties
Answer: This amounts to an import in accordance withthe definition of the word import in the IGST Act, 2017which provides that bringing into India of any goods fromany place outside India is an import of the goods. What ismaterial in this definition is the mere act of bringing intoIndia; the ownership is not material for determining whetheran import has taken place. Banks, being registered entities,would be liable to pay IGST on such imports but not theoverseas entities since they are not effecting the import.

Question 4: Gold and silver imported by banks/nominatedagencies on consignment basis are lying in stock as on 1stJuly. Clarification is required on how to charge the customers
in transition phase from VAT to GST. Will customers be liableto pay GST rates
Answer: GST is payable @ 3% with effect from 01.07.2017.
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Question 5: Banks lend gold in physical form for a periodnot exceeding 6 months. Banks receive interest on the goldounces disbursed and the same is converted into Rupees
after calculation of interest on the ounces and the USD/INRconversion. Will the same methodology continue in case ofGST as well wherein Banks shall pay a provisional GST (i.e.IGST/SGST/CGST) on ongoing market prices and pay the finalGST as and when the prices are fixed
Answer: Yes, Banks may avail of the benefit of provisionalassessment provided under section 60 of the CGST Act, 2017.

Question 6: Banks pay provisional VAT currently at the timeof delivery of gold on the basis of ongoing market prices.When customer fixes the price of metal, Banks pay actual VATon the maturity date of the Gold Loan. Banks must be allowedto set-off the excess provisional GST paid to the governmentagainst future fixation of prices. In case of excess payment,the same should be refunded on Pan – India basis and not onthe basis of States.
Answer: Banks may claim refund in accordance with theprovisions of section 54 of the CGST Act, 2017. Interest ispayable in such cases as provided in section 56 of the CGSTAct, 2017. In this connection, section 60(5) of the CGST Act,2017 may be referred to.

Question 7: When we are selling Gold, Diamond or SilverJewellery to the end consumer (Customer) like a Gold Chainweighing 10gm at a total value of Rs. 30,000/- (gold valueis Rs. 28000/- and making charges on that gold chain is Rs2000/-), can we charge GST @3% on the total value or @3% onthe gold value and @5% on making charges
Answer: GST is payable at the rate of 3% of the totaltransaction value of jewellery, whether the making charge isshown separately or not.

Question 8: When we issue gold as raw material to our JobWorker for Job Work and he returns that gold as finishedgoods,what GST treatment will be done and how to calculate
the value
Answer: The job worker, if registered, would be required topay GST at the rate of 5% on job charges only. The jewellerymanufacturer would in turn take credit of GST paid on suchjob work and may utilize the same for payment of GST onhis outward supply of manufactured jewellery. However, ifthe job worker is exempted from registration, the jewellerymanufacturer would be required to pay GST on his inputsupply from the job worker [of jewellery made out of preciousmetal given by him] on reverse charge basis. Nonetheless, hewould be eligible to avail input credit of the tax so paid underreverse charge mechanism.

Note: Reference to CGST Act, 2017 includes reference toSGST Act, 2017 and UTGST Act, 2017 also.