Gem & Jewellery Trade Council of India

(GJTCI): The GJTCI was founded in 2000, and is tasked with

resolving any issue arising from trade in gems and jewellery. It

plays an important role in showcasing the Indian gems and
jewellery to the international as well as the domestic market.
Like the GJEPC, GJTCI also provides information to its members
through a monthly newsletter, various educative and trademotivational events such as seminars, workshops, exhibitions,
festivals etc.

The Bureau of Indian Standards: The Bureau of Indian

Standards (BIS), the National Standards Body of India, is a

statutory body set up under the Bureau of Indian Standards Act,
1986 and is responsible for hallmarking gold jewellery in India.
Deregulation of Gold in India
In the pre-liberalisation period (prior to 1991), severe
restrictions on the export and import of gold from and into India
were imposed. During that time only the State Bank of India
(SBI) and the Metals Trading Corporation of India (MMTC) were
allowed to import gold.
The reasons for imposing these restrictions were:
To reduce demand for, as well as availability of gold
To alter the savings preferences of the population in favour
of investments other than gold/silver
To stop smuggling of gold
To conserve foreign exchange resources
To prevent generation of or to unearth black money. It was
thought that since gold was one of the most obvious choices
for keeping undeclared/ill-gotten income and wealth, a

policy to restrict supply of gold would be effective in curbing

black money.
.

Analysis of prescribed additions and deletion to the

net profit as shown in the profit & loss account:Explanation 1 to sub-section (2) of section 115JB prescribed some items
which has to be added or deleted from the net profit as shown in the profit
and loss account.
1). Additions to net profit: Where followings amount (form I to IX) debited
to profit & loss account:1.

Amount of income tax paid or payable and the provision thereof.

( the word Income Tax includes CDT u/s 115-O, Interest under
income tax act, Education Cess, Income tax and others)

2.

The amount carried to any reserve by whatever name called. (like

Reserve for expense, excess provision & etc.)

3.

The amount set aside for unascertained liabilities i.e. provision for
unascertained liability (like pro. for Bed Debts, prov. for gratuity on
ad-hoc basic etc.)

4.

Provision for loss of subsidiary companies

5.

Amount of dividends paid or proposed.

6.

Amount of expense relatable to any income to which section 10, 11,

12 (except sec. 10AA & 10(38)) apply. (Its mean income u/s 10AA &
long term capital gain exempt u/s 10(38) are subject to MAT).

7.

Amount of depreciation (including depreciation on account of

revaluation of asset).

8.

Amount of deferred tax and provision therefor

2).

Deletion to net profit:

1.

Amount withdrawn from any reserves or provisions and credited to profit

& loss account provided that book profit of relevant previous year should
have been increased by such amount.

2.

The amount of income to which any of the provisions of section 10, 11 &
12 except 10AA & 10(38) apply.

3.

Amount of depreciation debited to profit & loss account, excluding the

depreciation on account of revaluation of assets. (i.e. actual depreciation
not on part of revaluation has to be deleted from net profit)

4.

Amount withdrawn from revaluation reserve and credited to profit & loss
account to the extent of depreciation on account of revaluation of asset.
Amount of loss brought forward or unabsorbed depreciation, whichever is
less as per the books of account. However loss shall not include the
depreciation. (if loss brought forward or unabsorbed depreciation is nil then
nothing shall be deducted.)

5.

Amount of Deferred Tax, is any such amount is credited in the profit &
loss account.

. Tax and duty structure

Indias taxation system is unusually complex, especially where indirect

taxes are concerned. While income tax, excise and customs duty are set
by the Central Government, states and municipalities also levy their own
taxes.
Taxes

Corporate
tax rate

Particulars

Domestic companies:As per the corporate tax rates

for the 2015-16 fiscal, domestic companies, are
levied with an income tax at the rate of 30%.
Surcharge is applied in the following cases:
If the company has a total income less than Rs. 1
crore, then it does not have to pay any income tax.
If the net income of the company for that year is
in the range of Rs. 10 crore then 5% surcharge is
applied on its net income.
If the net income of the company for that year
exeeds Rs. 10 crore then 10% surcharge is applied
on its net income.
Plus Education Cess is levied @ 2% of income-tax
and Secondary and higher Education Cess is levied

@ 1% of income-tax.
Foreign companies: According to the corporate tax
rates for 2015-16 fiscal, international business
organizations working in India and earning more
than 10 million rupees need to pay a corporate tax
rate of 42.024 percent. This includes a basic tax of
40%, an education cess of 3 percent and a surcharge
of 2%.
If their aggregate income is less than INR 10
million they have to pay a corporate tax of 41.2
percent. This includes a basic tax of 40 percent along
with an education cess of 3%.
If the net income for a foreign company exceeds Rs
10 crores then the surcharge that it will have to pay
will be 5%.
Minimum
Alternate
Tax (MAT)

If a firms tax liability is less than 10% of book

profits, the book profits are deemed to be total
income and are levied tax at 10%. The effective
MAT Rate is 18.5%, including 10% surcharge and
3% education cess. MAT credit for the amount of

MAT in excess of regular taxes can be carried

Fringe
Benefit Tax

forward for up to 7 years

33.99% on the defined value of fringe benefit

provided.
Dividend tax Dividends received by Indian companies from
outside India, are subjected to a tax rate of 30
percent along with cess and surcharge. A gross tax
rate of 15 percent has also been proposed in case an
Indian company has got dividends from an overseas
company. It is expected this will encourage Indian
Capital

companies to repatriate their money.

In addition to income tax, all companies must pay a

taxes

1% wealth tax on the aggregate value of specified

assets net of debt secured on, or incurred in relation
to those assets. This tax applies to amounts that

Taxes on
interest
income

exceed INR 1.5 million of specified assets.

Taxed at same rates applicable to companies.
However, tax to be deducted at source at 20% (plus

applicable surcharge and cess).

In India Real asset capital gains are taxed at the same rate irrespective of
the overall amount of gain.
Particulars
Taxes
Taxes
Excise
rates

Particulars
Present excise rate is12% (hike of 2% from January)
Excise duty is levied by the central Government on

the manufacture of movable and marketable goods in

India.
The manufacturer is allowed to take credit of excise
duty paid on locally sourced goods and the Additional
Duty of customs on imported goods. Excise duty on
raw material and packing material is eligible for
setoff.
Education cess of 2% and secondary higher education
cess of 1% are also liveable on excise duty payable
Centra
l sales
tax

on the transaction.
On procurement of raw material from outside the
State, the sales tax was 4% against form C in the year
2002. At present, the central sales tax (CST) rate is
2%. The CST paid on the procurement is not
available for setoff and is a cost. In addition, some
States have entry tax in the range of 1% to 5% on raw
material.
Education cess of 2% and secondary higher education
cess of 1% are also liveable on CST payable on the

Value
added
tax
(VAT)

transaction.
Under the VAT regime, the VAT paid on purchases
within the State is eligible for VAT credit. The present
VAT rates are 4 and 12.5%.
Education cess of 2% and secondary higher education
cess of 1% are also liveable on VAT payable on the

transaction.

Corporate tax planning

M.B.A 3rd SEM.
SECTION-C
2015

TAX PLANNING OF GEMS AND JEWELLERY INDUSTRY

Submitted to:
DR. RACHNA JAIN

submitted by:
AAKASH CHADHA
SHIVANI MALHOTRA
MANOJ GUPTA
AKSHAY GUPTA