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India
By Zainab Morbiwala
Diamonds may be a girl’s best friend but given the demand dynamics, it seems girls – along with everyone — are losing their interest in diamonds and befriending something else. The market conditions have not as yet improved and the industry overall is facing a tough time ahead.
In an exclusive interview with Rapaport Magazine, Dinesh Navadia, president of the Surat Diamond Association (SDA) explained, “The market for diamonds in India post-Diwali has seen some positive growth, but to bring in stability between demand and supply for rough, it is important that diamond manufacturers restrain from investing in more rough without clearing off the inventory they have.” Navadia shared that the development of the small and medium enterprise (SME) sector under the association would address the issues they face in relation to import, finance and other related things that could help them boost their business. Navadia added, “The committee has already agreed to have an SME sector under the Gem and Jewellery Export Promotion Council (GJEPC). We should see it being operational this year.” Mehul Choksi, chairman, Gitanjali Group, speaking exclusively with Rapaport Magazine, pointed out, “The gems and jewelry industry in India is facing a shortage of rough, keeping in mind the speculative demand.” He added, “We have to look at the demand for polished stock — it hasn’t as yet seen much improvement. It is important that we see profitability this year, as we have witnessed negative growth for the past two years. We need equilibrium between rough and polished. I believe 2016 should be a better year.” Highlighting the negative phase that the gems and jewelry industry is currently experiencing, Sabyasachi Ray, executive director, GJEPC, told Rapaport Magazine exclusively, “It is a matter of concern to look at the figures of rough imports. Never in the past four decades have we witnessed such a drastic drop. If we take into consideration the period between April 2015 and September 2015, the import of rough has gone down by 26 percent in value and 15 percent in quantity. This is not a good sign. The demand for diamonds is facing a global slowdown and this is one of the issues that is concerning us.”
In regard to the drop in imports of rough, a delegation from GJEPC met with the Finance Minister of India Arun Jaitley to discuss a positive way forward. According to a press statement by the council, the delegation requested the introduction of a Special Turnover Tax regime for the diamond industry, with.75 percent tax on sales turnover based on computing net income as 2.5 percent of turnover, up to 6 percent of income. This would be along the lines of the tax regimes prevalent in other diamond trading nations like Belgium and Israel. Such an approach would be tax neutral and encourage companies in Belgium and Dubai to shift capital in India, in addition to boosting exports. Another important point is the recently opened Special Notified Zone (SNZ) at the Bharat Diamond Bourse (BDB). Praveenshankar Pandya, GJEPC chairman, has urged the government to permit the sale of rough diamonds at the SNZ by implementing a .25 percent tax on sales turnover by foreign mining companies. According to him, this would generate a new era of tax collection by shifting such sales from Belgium, Israel and Dubai. At present, only the viewing of diamonds is allowed at SNZ but not the sale. Also discussed by Pandya at his meeting with the finance minister was the inclusion of the gems and jewelry segment under the interest subvention scheme and merchandise exports from India scheme (MEIS). According to Pandya, if implemented, this would immensely help the Indian gems and jewelry industry. Pandya also pointed out that the gold jewelry sector had huge potential and therefore jewelers should be included under the government’s gold monetization scheme. He noted that the current 2 percent difference between import duty on gold bars was too high and suggested it should be brought down to .25 percent. In speaking with Rapaport Magazine, Ray further suggested that the 2.5 percent import duty on colored gemstones too should be waived as this would help strengthen the colored gemstone and studded jewelry industry in India.
Choksi emphasized that keeping in mind the current political situation, the implementation of gross service tax cannot be expected to happen in 2016 and the standardization of certain taxes between different states in India would not be implemented. Speaking of the current movement of goods, Choksi shared, “We see a selective buying in smalls; particularly fine-make goods are moving. We are also seeing positive movement in very small sizes (-2) and +11 is moving in all ranges. There is a shortage of dossier.” Article from the Rapaport Magazine - February 2016. To subscribe click here.
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