Nodal jewellery trade body, All India Gem & Jewellery Federation (GJF), has met a dozen state finance ministers over the past three weeks, starting with Kerala’s Thomas Isaac, to “impress upon them” the need for goods and services tax (GST) of 1.25% on gold ornaments and bullion.

He said the Federation had “fruitful” discussions with a “positive” outcome. “We have met with a dozen finance ministers from states like Kerala, Rajasthan, Gujarat, Andhra Pradesh, Maharashtra, Gujarat, Kerala, etc, with a recommendation of 1.25% GST on jewellery,”.

Kerala is the largest consumer of jeweller among 29 states, accounting for around 40-50 tonnes each year, said Chirag Sheth, research consultant at precious metals consultancy Metals Focus.

However, Khandelwal said that though Kerala imposes 5% VAT on gold compared with 1% by other states, the effective rate is 1% because of a compounding scheme, whereby jewellers agree to pay a certain tax rate above that of the preceding year irrespective of turnover.

Presently, gold bars attract 10% import duty. Jewellery in most states, except Kerala, bear 1% VAT and 1% excise.

However, less than 10% jewellery manufacturers pay excise as they fall below the Rs 10 crore annual threshold for the levy, trade estimates. GJF argues that 1.25% will ensure greater compliance and accrue higher revenue to states than at present as the GST threshold is much lower at Rs 20 lakh a year.