India Slashes Import Tax on Precious Metals, Leaves Out Diamonds

The Indian government has reduced tariffs on gold, silver and platinum, while providing only minimal concessions for diamonds. 

Import tax on gold and silver will drop to 6% from its previous 15%, while platinum is now 6.4%, a move India’s Gem & Jewellery Export Promotion Council (GJEPC) calls a “game changer,” it said last week. The drop is a step toward making India’s gem and jewelry sector a global hub capable of competing with Dubai and Belgium, the GJEPC explained. 

However, the government declined to lower the import tax on polished diamonds. The GJEPC had been asking for a decrease from the current 5% rate to 2.5%, noting that it would help the trade cope during a challenging time brought on by the economic downturn and lower demand for diamonds. 

The country introduced some other changes for diamonds, including the abolition of the 2% equalization levy on sales of rough diamonds online, which will no longer apply after August 1. The government also initiated a “safe-harbor rule” on the sale of rough in the country’s Special Notified Zones (SNZs) — dedicated trading centers where producers can hold viewings without incurring income tax. This means foreign mining companies can now trade rough directly to manufacturers in these areas without the need for Indian cutters to travel overseas to participate in diamond auctions. 

Prior to the safe-harbor rule, sales at SNZs were taxable, meaning that around 60% of the rough brought to the area for viewings returned to Dubai or Antwerp for transactions to take place, with importers then shipping the goods back to India at cost. The GJEPC argued that allowing transactions in SNZs would make India more competitive, as Dubai currently has no direct tax on the sale of displayed rough, while in Belgium, it’s only 0.187%. 

“The [government’s] acceptance of GJEPC’s long-standing recommendation for simplifying taxation rules on [the] sale of diamonds in SNZs by foreign miners, along with [the] abolition of [the] equalization levy…is a game changer,” the GJEPC said. “This will put India on equal footing with global trading centers such as Belgium and Dubai…and will further promote the development of the gem and jewelry sector.” 

Image: Polished diamonds. (Shutterstock)