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GJEPC Seeks Duty Free Import Quota for Polished Diamonds
Jan 29, 2013 10:51 AM
By Dilipp S Nag
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RAPAPORT...The Gem & Jewellery Export Promotion Council (GJEPC) has requested the government of India to allow duty free import quotas for cut and polished diamonds to the tune of 15 percent of the previous year’s exports. This request came because the levy of 2 percent duty on polished diamond has resulted in lower trading activity.
“We have gone with a suggestion that didn't permit unlimited [polished] import at zero percent duty but did permit us at least 15 percent of our previous year’s turnover at zero percent,” said Pankaj Parekh, GJEPC’s vice chairman at a conference on Tuesday in Mumbai.
For the calendar year 2012, India’s polished exports declined 37 percent year on year to $16.986 billion with the average price of the polished exports up 15 percent to $504.94 per carat. Polished imports slumped 72 percent to $5.592 billion in 2012. Weak demand from overseas markets and the import duty on polished diamond restrained the overall trade during the year. In January 2012, the government imposed a 2 percent tax on the import of cut and polished diamonds, after more than five years of duty free imports.
According to trade officials, the government’s move was aimed at curbing the widespread practice of round-tripping, whereby companies seek to boost turnover by the frequent import and export of the same diamonds in order to get additional bank financing.
 GJEPC, which submitted its recommendations to the government for the federal budget for fiscal year 2014, due to be announced on February 28, has requested for eased tax norms, given the slowdown in economy. The council has also recommended for correct implementation of the Benign Assessment Procedure of Income Tax for the diamond industry in the way of reduction of net profit to 2.5 percent of turnover instead of 6 percent for computation of income tax.
“Our aim has always been to stimulate greater foreign and domestic participation and also relieve the industry from the various challenges it currently faces,” said Vipul Shah, GJEPC’s chairman. “The most significant reform on the agenda is the correct implementation of Benign Assessment Procedure and we are hopeful that the ministry will pay heed to this long overdue policy change.”
Parekh said that reduction in the gold import duty and introduction of presumptive taxation are key recommendations to the government. “With import duty on gold having increased by 600 percent in the last one year, this will drastically affect the lower and middle class end-consumers, who can no more afford to buy gold jewelry and hence will opt for either silver- or gold-plated jewelry,” he noted.
The government increased the import duty on gold and platinum to 6 percent from 4 percent earlier this month in an effort to discourage demand, mainly gold, which has contributed to the country's large current account deficit.
Parekh stated that the higher import duty will pose a challenge to the jewelry industry, which will now have to be highly competitive to create very light-weight jewelry to retain their existing client base. The increased duty will also give rise to smuggling of gold bullion.
Notified Zones for Rough Diamond Import and Trading
In its budget recommendation, GJEPC also urged the government to establish special notified zones for import and trading of rough diamonds with an aim to attract international mining companies and trading players to sell rough diamonds in India. “This is applicable to foreign diamond mining companies in such zones, whose net income is fixed and taxes are paid only on invoices raised to Indian companies,” it noted.
Sanjay Kothari, the convener of promotional marketing and business development at GJEPC, said that India is the largest manufacturer and importer of rough diamonds but currently Indian companies’ requirements are met through centers such as Belgium, Dubai and Israel directly, or goods are re-directed through these centers.
“Why not create a notified zone where in Rio Tinto or De Beers and other big players can come and sell their rough raw materials to us,” Kothari said. He suggested that the mining companies can bring the goods on consignment basis in such notified zones, the government may impose 1 percent levy on the turnover of goods sold, while the companies should be allowed to take back the unsold goods.
“In Bharat Diamond Bourse we have enough space for such notified zone but the policy should come in place. That is what we are asking them,” Kothari said. This will help in reducing the transaction cost and traveling hassles, he noted.
GJEPC has also requested that a special $3 billion to $5 billion fund be established by the Reserve Bank of India (RBI) to refinance the borrowing by export industries, which have a high import content of more than 70 percent of their exports, among others.
Shah said that the central government has sanctioned $37 million (INR 2 billion) to build a convention center in Mumbai and now the council will request the state government of Maharashtra to allot the land for the same at subsidized rate.
The council has scheduled various trade events, buyer-seller meetings and conferences to promote Indian talent and trade in the domestic as well as overseas market to counter the slowdown, he noted.
Shah stated that the sixth edition of India International Jewellery Show – Signature will be held in Mumbai from February 22 to 25, with about 450 exhibitors. This show will be followed by the first Indo-China Gemstone Buyer Seller Meet in Jaipur in April and thereafter, the first ever Indo-Australia Buyer Seller Meet in Sydney, Australia.
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Tags:
budget, diamond, diamonds, Dilipp S Nag, Duty, GJEPC, gold, Import, India, Jewelry, rough, tax, Vipul Shah
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