Organised jewellery retails will get a boost in the Goods and Services Tax (GST) regime as business is likely to be weaned away from unorganised players, who account for three-fourths of the industry’s annual revenue, a CRISIL report said.
The overall increase in the end price of jewellery is expected to be about one per cent, the report said.
Currently, the unorganised player’s annual revenue estimated by CRISIL at about Rs 2.85 lakh crore.
Besides GST, other measures such as ban on cash purchases of more than Rs 2 lakh per transaction, gold-on- loan and gold deposit schemes will also benefit the organised retailers, it added.
The implementation of GST along with the ban on cash purchases above Rs 2 lakh with effect from April 1, 2017, are likely to push more consumers to organised jewellery retailers, which would improve their business profiles.
“The modest increase in the overall tax rate is not expected to impact demand. Further, better supply-chain efficiencies and transparency will provide an edge to the organised players and help them gain market share over the medium term,” CRISIL Ratings Director Amit Bhave said.
GST compliance is an effort-intensive process and will be more cost-effective for the organised retailers because of their large scale of operations.
In addition, they operate largely from leased premises and under GST they will benefit from set-off of tax paid on rent, the report said.
CRISIL said, because of the cascading nature of tax, the entire jewellery supply chain will come under the tax net, making it more traceable, which is advantageous to the organised retailers.
Further, the tax on making charges has been set at five per cent against nil tax earlier.
CRISIL expects revenues of organised jewellery retailers to grow at five-six per cent, almost double the overall industry growth of three per cent.