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India Trade Seeks Tax Reduction on Polished Diamonds, Gold

January 22, 2024  |  Leah Meirovich
Polished diamond credit Shutterstock

India’s diamond sector has asked the government to reduce import duties for polished, maintaining that a lower rate would boost the country’s position as a trading hub.

The Gem & Jewellery Export Promotion Council (GJEPC) wants import tax to drop to 2.5% from its current rate of 5%, the trade body said in a statement last week.

“Gem and jewelry exports have been facing a challenging time on account of economic downturn in key export markets,” said GJEPC chairman Vipul Shah. “[Reducing] import duty on cut and polished diamonds from 5% to 2.5% will help [India] to cope [with] the impact of beneficiation policies undertaken in a number of natural-diamond-mining countries.”

Beneficiation refers to government agreements that offer incentives for cutting and polishing the diamonds within the country of origin. An increasing number of African producer countries, including Botswana, have begun implementing such policies, retaining much of the larger rough for their own manufacturing sectors. This means only smaller rough goods, including some semi-processed stones, are getting exported to India. However, because the diamonds have been manufactured to an extent, they are being taxed as cut and polished stones, the GJEPC explained.

Lowering the import tax rate “will give India a level playing field with competing countries,” asserted Shah. “India can become a trading hub like Dubai and Belgium, and our diamond manufacturers will not have to travel abroad to get access to these trading hubs.”

The council also urged the government to drop the import tax on other cut and polished gemstones from 5% to 2.5%, and to reduce import duty on precious metals such as gold, silver and platinum.

Additionally, it wants India to let miners sell rough diamonds in the country’s Special Notified Zones (SNZs) — dedicated trading centers where producers can hold viewings without incurring income tax. Since actual sales are taxable, around 60% of the rough currently returns to Dubai or Antwerp for the transaction to take place, with importers then shipping the goods back to India at cost, the GJEPC elaborated.

Allowing transactions in the SNZs would give Indian diamantaires more flexible, timely and cost-effective access to diamonds from smaller miners, the trade body said. Such a move would also insulate Indian manufacturers against relying heavily on major mining companies such as Alrosa, which many consumer countries have sanctioned amid the Russia-Ukraine war, the proposal noted.

Main image: A polished diamond. (Shutterstock)

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Polished diamond credit Shutterstock India Trade Seeks Tax Reduction on Polished Diamonds, Gold

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