The Gems and Jewellery Federation (GJF), the national body of the jewellery trade, and the apex industry body Gems and Jewellery Industry (GJI) have opposed the provisions of 2% minimum alternative tax (MAT) and tax deduction at source (TDS) at the supply point proposed in the new Direct Tax Code. Both the industry bodies have also made representations to the Finance ministry to seek modifications in the DTC.
GJF strongly objects to 3 key issues of DTC which include search & seizure provisions, tax on gross assets and TDS on all payments. Anantha Padmanaban, Director of GJF said.
GJF also objects to 2% tax on gross assets since the industry operates on small margins with high inventory levels, he said.
In this case a company earning 2% net profit would require to pay the same tax as a company earning 8% net profit. GJF also objects to the deduction of tax at 10% on all payments made for gold, diamonds, jewellery, as it would result in blockage of working capital for the industry, which is facing a major liquidity crunch.
Certain schedules proposed in the direct taxes code like search and seizure provisions, tax on gross assets are highly penalising to the industry which is already reeling under the effects of global recession. GJF has more than 300,000 manufacturers, wholesalers and retail jewelers in India.
Meanwhile, Bachraj Bamalwa, vice-chairman of GJM, addressing a press conference at Kolkata on Thursday said such provisions would have a cascading effect on the Rs 1,12,000 crore Indian gems and jewellery market with the government virtually trying to confiscate traders working capital.
Bamalwa said the government with the proposal of 10% TDS at the supply point would virtually block Rs 10,000 crore by way of advance taxes and it would be similar to taxing capital without considering the income from it.
One kilo of gold currently costs around Rs 17 lakh, on which the supplier has a profit of around Rs 4,000. Paying 10% TDS at the supply source means he would have to pay Rs 1.70 lakh to the government at the time of transaction, Bamalwa said.