February is an important month for both businessmen and laymen in
India. It’s the month when the government releases the Union Budget — a
detailed document of how much money the union government expects to raise in
the coming year, and how and where it plans to spend those funds. The budget
includes changes to import and export duty structures — which go into effect
immediately — and sets dates for adjustments to goods and services taxes (GST).
What jewelers want
Of course, such changes
impact the country’s gem and jewelry industry. Sabyasachi Ray, chief executive
director of the Gem and Jewellery Export Promotion Council (GJEPC), outlined to
Rapaport Magazine the key recommendations that his group had put forth for the
upcoming budget. Among them were:
1. Introducing a realistic presumptive taxation program for the cut-and-polished
diamond and colored-gemstone industry. “Presumptive taxation is
prevalent in advanced countries such as [those in] the European Union to
evaluate and tax the profit of the diamond industry,” said Ray. Under such
programs, tax is based on average income instead of actual income. “The
introduction of presumptive taxation would not only increase the ease of doing
business for diamantaires, but also quantify the tax they have to pay on the
business they conduct. This would encourage diamantaires from across the world
to start operations in India [as opposed to] Belgium, Dubai and Hong Kong.”
2. Instituting a job-work model for the diamond, precious- and
semi-precious-stone industry. This would enable
industry players in other global markets to send diamonds and other stones to
India for “job work” by contractors without facing import and export charges —
as long as the goods are reexported directly after these processing activities
are complete, and do not stay in the country, explained Ray. “There is no such
enabling policy in India for such a job work model for diamonds, [and it] needs
to be introduced, as it is available to all other sectors.”
3. Reducing the import duty on gold to 6% from the current 10%. “A hike in duties has led to a reduction in jewelry exports,”
stated Ray. “This also increases the probabilities of [smuggling] gold into the
country through illegal channels.” High import taxes are blocking working
capital for small and medium exporters, he added, as well as “hampering the
livelihood of millions of small karigars [local craftsmen] and artisans across
the country.”
These recommendations are
more or less the same as the ones the GJEPC suggested for the previous budget
in 2017-18, which contained no announcements for the sector, according to Ray.
Although this year’s budget was set for release earlier than usual — February
1, rather than the standard last day of the month — its contents remained
unknown at press time. Nonetheless, the industry is hoping for good news.
A welcome GST revisionIn a related development,
the Goods and Services Tax Council recently reduced the GST rate on
cut-and-polished diamonds and precious stones from 3% to 0.25%.
The GJEPC welcomed the
move, with chairman Pramod Agarwal saying it would help smaller gem and jewelry
players such as brokers, agents and traders “function smoothly, without
blockage of working capital.”
“Looking at the six
million-plus jobs that this sector accounts for and the $43.2 billion exports
out of the country, this cut in the GST rate will definitely help the industry
to grow further,” he declared.
Article from the Rapaport Magazine - February 2018. To subscribe click here.