India’s decision to increase import duty on diamonds could negatively affect the domestic industry, the nation’s Gem & Jewellery Export Promotion Council (GJEPC) has warned.

The country recently hiked the rates on cut-and-polished, semi-processed and lab-grown diamonds to 7.5% from 5%, effective immediately, the GJEPC reported last week. The government also made the same adjustment for cut-and-polished colored gemstones.

The import-duty increase…would increase the cost of business for the sector, and impact exports and trade,” Pramod Agrawal, chairman of the GJEPC, argued. “India…is not just a hub for processing rough, but also caters to varied forms of reprocessing of diamonds and diamond jewelry.

The changes would limit business in India’s cutting and polishing sector, as customers may turn to other diamond-trading centers such as New York, Dubai and Israel instead, Agrawal added.

In contrast, the GJEPC welcomed the government’s move to raise import duty on jewelry to 20% from 15%, noting it would help strengthen India’s jewelry-manufacturing sector. The hike will boost the nation’s exports and help establish India as a jewelry brand, the organization explained.