The All India Gem & Jewellery Domestic Council (GJC), a significant representative body of the jewellery industry in India, has sent Finance Minister Nirmala Sitharaman full pre-budget recommendations as the Union Budget 2026–2027 approaches. These recommendations call for tax reforms, the rationalization of the Goods and Services Tax (GST), and specific assistance for micro, small, and medium-sized businesses (MSMEs) in the industry. The suggestions aim to improve the profitability of tiny jewellers in India’s formal sector, increase demand, ease compliance, and reduce cost constraints brought on by rising gold prices.
The jewellers’ body highlighted structural challenges faced by the industry, which has felt the impact of rising bullion prices and a difficult operating climate over the past year. According to its submission, the inflation-led rise in gold costs has not only increased the effective tax burden on consumers but also tied up significant working capital, placing a disproportionate strain on smaller players who lack the financial cushion of larger businesses.
GST Rationalisation and Tax Relief Central to Recommendations:
The call to rationalize the Goods and Services Tax (GST) on gold and silver jewelry is at the top of the GJC’s recommendations. The group claims that the current 3% GST on these goods increases consumer price pressure and reduces demand, particularly among middle-class and rural consumers. In order to bring taxes into line with market realities and boost demand, the council has suggested lowering the GST rate on jewelry to 1.25% or a consistent 1.5% across the industry.
Concerns over an inverted duty structure affecting jewelers’ business were also raised by the council. This occurs because the final product is taxed at a far lower rate, yet services like rent, security, and logistics are subject to 18% GST. In order to rectify this imbalance, GJC has proposed either a 5% GST reduction on such input services or a return mechanism for accrued input tax credit (ITC) on services. This would facilitate compliance and free up operating capital for smaller enterprises. Another important recommendation calls for clarifying the GST rate on job-work services, which is generally considered to be 5%, but often faces inconsistent interpretation in practice. According to the industry body, clear guidelines would reduce compliance confusion, prevent harassment during audits and enable karigars (craftsmen) and small business owners to operate with more certainty.
Beyond GST changes, the GJC has sought direct tax relief on unrealised inventory gains caused by fluctuating gold prices. The body proposes a one-year deferral of income tax on such notional gains for the financial year 2025–26, arguing that jewellers’ working capital remains tied up in inventory and that taxing unrealised price increases would be inequitable and liquidity-draining. It has also recommended an exemption from capital gains tax when hallmarked jewellery is exchanged and reinvested into new pieces, which could encourage more formal economy transactions.
Support for MSME Jewellers and Formalisation Measures:
Recognizing that many jewellers fall into the MSME category, the council’s contribution emphasizes the importance of simpler compliance standards geared to small firms. This includes boosting the turnover criteria for GST returns and preventing MSME jewellers from receiving duplicate letters after audits, which are a major compliance stress area for smaller companies. Such steps are designed to lessen administrative burdens while allowing MSMEs to focus on growth and competition.
In addition to compliance relief, the GJC recommended the operationalisation of the Tourist GST Refund Scheme at major international gateways. This initiative aims to attract foreign buyers by enabling them to claim GST refunds on jewellery purchases made in India, potentially boosting inbound tourism spending and putting India on par with other global shopping destinations. The council argues that such a step would not only increase retail sales but also promote India as a global jewellery shopping hub.
The council has also called for lower merchant discount rates (MDR) on credit card transactions and the introduction of formal EMI options for hallmarked 22-carat jewelry in order to increase the appeal of Indian jewelry for domestic buyers. This would give consumers more flexible financing options and encourage larger purchases. As part of a larger effort to combine conventional jewelry retail with contemporary financial and digital systems, regulatory clarity and support for digital gold goods were also emphasized.
Industry Voices and Broader Sector Context:
GJC Chairman Rajesh Rokde framed the recommendations not as demands for concessions but as efforts to restore proportionality and fairness in the jewellery tax regime, arguing that targeted GST reduction and tax relief measures would draw more transactions into the formal economy and protect livelihoods of artisans and smaller traders. He noted that these reforms could make jewellery an accessible savings asset for Indian households while preserving the historic cultural importance of gold as a store of value.
The suggestions made by the jewelers are also in line with more general demands from the MSME sector, which wants the Union Budget to strengthen GST reforms and policy support in order to spur growth and lessen operational difficulties. MSME stakeholders have emphasized the significance of easier access to credit, quicker GST refunds, enhanced digital infrastructure, and regulatory clarity all of which would strengthen the resilience of small businesses generally and supplement the sector-specific recommendations from the jewelry industry.
As Finance Minister Sitharaman prepares to present the Union Budget on February 1, 2026, the jewellers’ body’s proposals are likely to be part of a wider consultative process with various industry stakeholders. Given the jewellery sector’s deep linkages with India’s cultural traditions, rural demand, and domestic savings patterns, tax rationalisation and MSME support measures could resonate strongly with policymakers seeking to balance fiscal prudence with growth support for job-intensive industries. The final Budget outcome will be closely watched by jewellers and MSME advocates alike, with anticipation that meaningful policy shifts could stimulate demand, enhance formalisation and strengthen the competitiveness of India’s gems and jewellery sector in both domestic and global markets.
