Cabinet Decision No 127 of 2024 on implementation of RCM on Precious Metals & Stones

Cabinet Decision No 127 of 2024 on implementation of RCM on Precious Metals & Stones

by | Nov 25, 2024

The Ministry of Finance has issued Cabinet Decision No 127 of 2024 repealing the earlier Cabinet Decision No 25 of 2018. The new decision aims at expanding the scope of applicability of Reverse Charge Mechanism (RCM) to include precious metals and stones.

The applicability of domestic RCM was earlier restricted only to gold and diamond. The RCM applied only in case where the buyer and seller are both registered for VAT and the buyer confirms that the acquisition of goods is for the purpose of either re-sell or production or manufacturing of any other goods.

Some of the key aspects of the Cabinet Decision No 127 of 2024 are summarized below:

Particulars Implications
Scope of RCM
  • The scope of RCM has been expanded to include:

a) Precious metals (gold, silver, palladium, platinum)

b) Precious stones (natural and manufactured diamonds, pearls, rubies, sapphires, and emeralds)

c) Jewelry made from any of these precious metals or stones, provided that their value exceeds the value of other components
Applicability of Decision
  • As per the Decision, a VAT Registered supplier will no longer be responsible to charge and collect VAT on supply of aforementioned categories of goods
  • Instead, the VAT registered customer will be responsible to calculate the VAT on their purchases and declare it in their VAT return
  • The decision applies only in case the supplier sells the goods to a VAT registered customer and in any other case, the supplier will be responsible to collect and discharge VAT under the normal mechanism
Implications
  • The Decision will help the suppliers and buyers to reduce the cashflow impact caused due to charging VAT on such high value category of goods
  • It will reduce the administrative compliances applicable to traders in such industry and reduce the requirement of filing refunds, wherever applicable

The above changes are a positive step for the industry players and help create a tax ecosystem which reduce administrative and cashflow burden and increases overall efficiency of doing business

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