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GJEPC Recommends Simplified Tax Regime

Feb 9, 2012 6:40 AM   By GJEPC
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Press Release: In a highly emotional plea to the government, the Gem & Jewellery Export Promotion Council (GJEPC), sought positive initiatives from the government for simplification of tax regime in the forthcoming budget during a press conference held in New Delhi today.

Highlighting the contribution of the entire gems and jewelry industry, including the creation of jobs and making India into the world’s leading gems and jewelry hub, Rajiv Jain, the chairman of GJEPC appealed to the government to remove tax related strangleholds that are preventing the industry from growing at a healthy and desired pace.

Additionally, some of these issues are also creating conflict resulting in litigation and high cost of collection of income tax. At the root of the matter lies the issue of the Presumptive Tax as recommended by the Sivaraman Committee in 2006 appointed by the then finance minister, P. Chidambaram, which the government has failed to implement. In other parts of world such as Belgium and Israel that were faced with similar challenges in tax collection, Presumptive Tax regime was successfully implemented and that helped the countries emerge has one of the largest diamond processing and trading hubs in the world.

As per the Sivaraman Committee’s recommendations, the introduction of a Presumptive Tax system would:

- Encourage more investment in the sector
- Retain trade, skilled labor and capital within the country
- Enable voluntary compliance leading to increased revenue
- Enhance global competitiveness of the Indian industry
- Foster increased employment opportunities

In lieu of these recommendations, a mere Benign Assessment Procedure was introduced in 2007-08, which has not achieved the desired results and on the contrary is actually impeding the progress of the industry. In its latest appeal, the industry is seeking for the withdrawal of the Benign Assessment Procedure and the acceptance of the Sivaraman Committee’s recommendation. The GJEPC recommended that the prescribed rate to be reflective of the reality in the diamond manufacturing and trading industry, which is in the range of 1 percent to 3 percent.

On the other hand, the non acceptance and non implementation will have adverse impact on the government as well as the gems and jewelry industry of India, some of which are as follows:

- Shifting of business to other jurisdictions and non fulfillment of the vision of establishing India as the trading hub
- Depleting profit margins within the sector, coupled with an uncompetitive tax environment are driving investments away from India
- Loss of employment in India

The other woes to which the industry is seeking solutions are as follows:
1. Import duty reduction on machinery from 10 percent to 5 percent
2. Import duty reduction on Worked Coral from 24.42 percent to zero percent.
3. Import duty reduction on Rhodium from 2 percent to zero percent.
4. Income tax exemption to all export promotion councils
5. Amendment in the Income Tax Act, 1961 - Trading in derivatives in specified stock exchanges will not be treated as “speculative transactions for the purpose of Income Tax Act
6. Withdrawal of 1 percent excise duty on branded jewelry
7. To allow import of rough diamonds on consignment basis from mining companies like ALROSA, De Beers.
8. Reduction of interest in export sector in rupees terms
9. Availability of dollar financing to exporters.

The GJEPC expressed the immediate intervention of the Ministry of Commerce to impress upon the Ministry of Finance the urgent need for introduction of a Presumptive Turnover based tax scheme at a rate reflective of the profits actually generated by the majority of the industry.

About GJEPC
The Gem & Jewellery Export Promotion Council is an all - India apex body for gem and jewelry representing 5,500 members. Set up in 1966, it operates under the supervision of the Ministry of Commerce & Industry, Government of India.

Rapaport News is not responsible for, and does not endorse, the content of any press release. Press releases are not written by us and are provided only as additional information for our clients.
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Tags: budget, diamond, GJEPC, India, jewellery, Jewelry, Rajiv Jain, tax
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