Shares of gem and jewellery firms listed on the Bombay Stock Exchange (BSE) surged on Monday in the wake of the Indian government’s announcement that gold and gold jewellery would attract a Goods & Services Tax (GST) of 3 percent.

Shares of Titan Co. Ltd, owned by the giant Tata industrial group and which in turn owns the Tanishq jewellery brand as well as the Titan watch brand, shot up the most, rising 17 percent. Others, like Gitanjali Gems Ltd., Tribhuvandas Bhimji Zaveri Ltd., Tara Jewels and PC Jeweller all rose upwards of 6 percent.

Two factors are quoted as being behind the rise. To begin with, the GST rate is lower than what was expected. Industry buzz before the announcement had the GST rate on gold and gold jewellery pegged at between 4 and 5 percent.The announcement that it would stay at just 3 percent brought an immediate thankful response from the domestic jewellery retail industry, even while the diamond industry was berating the government for its imposition of a 0.25 percent GST on the import of rough diamonds.

Secondly, GST, along with other measures like a limit on cash transactions, brings the entire domestic jewellery retail industry into the trackable economy and the tax net.

Jewellery retail businesses, particularly the sprawling family-run small and medium enterprises (SMEs), have hitherto been largely driven by cash transactions. GST is expected to increase the compliance cost of these largely unorganised SMEs and make it more difficult for them to operate in the country’s new business and taxation environment.

Investors have therefore, bet that the more organised players will have a more robust future and a no-pain transition to the new system. Titan and its Tanishq jewellery brand, which currently only have a 5 percent share of the total Indian jewellery pie, nevertheless have the highest brand equity and are expected to gain the most in the medium term.

https://www.gemkonnect.com/news/listed-indian-jewellery-retail-stocks-rise-wake-gst-announcement