The Indian diamond industry has urged the government to cut taxes and lift red tape ahead of the country’s annual Union Budget, arguing that exports could double under the right conditions.
The Gem & Jewellery Export Promotion Council (GJEPC) has called for import duty on polished stones to drop to 2.5% from the current 7.5%, it said Thursday. The council also wants India to permit direct sales of rough diamonds in special notified zones (SNZs), and to clarify whether a new e-commerce duty applies to digital rough tenders.
All three proposals have been on the GJEPC’s agenda for a while, with the council arguing that lower import taxes would strengthen India’s position as a distribution hub for polished. Enhancing India’s competitive advantage “will help the country to grow as the diamond manufacturing and trading hub of the world, and double annual total gem and jewelry exports from $35 billion to $70 billion,” the GJEPC estimated in its budget recommendations.
Meanwhile, allowing miners to sell rough in SNZs — designated tax-free trading centers — would prevent them from having to ship goods to Dubai or Antwerp before sending them back to India, the council noted. At present, miners can hold viewings at SNZs but cannot complete a sale without incurring income tax. Instead, sellers should pay a 0.16% tax on revenue, in line with the rate in Belgium, the GJEPC continued.
The trade group is also seeking official clarification of whether India’s 2% equalization levy, designed to target overseas e-tailers, applies when rough buyers make online purchases from miners. While Finance Minister Nirmala Sitharaman told GJEPC leaders in August that the tax didn’t apply to rough sales, the government has not issued a formal notification.
This tax poses a particular threat given the need for online trading during Covid-19, observed GJEPC chairman Colin Shah. “With the advent of the equalization levy, India would lose its global competitive edge,” he said.
The Finance Ministry began preparing the 2021-22 budget earlier this month, and is expected to present its spending plans in February, according to Indian media.