Six months into 2017, the gems and jewelry industry in India has been witnessing a roller-coaster ride in terms of demand for diamonds among other industry dynamics. Demand grew during the month of June but there was some unrest following the government’s announcement to implement the Goods and Service Tax (GST) as of July 1, 2017. GST IMPLICATIONS
In a protest against the GST levied on the gems and jewelry industry, diamond maufacturers in Surat shut down for one day on June 17. The Indian Express reported that the members of the diamond industry, along with Gujarat Cabinet Minister Nanubhai Vanani, met Deputy Chief Minister Nitin Patel, seeking withdrawal of the proposed GST on interstate diamond business To date, the industry is exempt from anyform of taxation. Along with Dinesh Navadia, president of the Surat Diamond Association (SDA), many other merchants met the minister and the Gujarat State VAT Commissioner P. D. Vaghela to discuss the issues the diamond industry will face after the GST is implemented. According to Harsh Sanghavi, member of the Legislative Council, Surat, the meeting went well and the point the group put forward was with reference to the 3 percent GST on interstate diamonds. He noted, “Generally, a diamond businessman owns a factory in Surat and a trading office in Mumbai and this will create problems. In addition to this, there are many diamond merchants who cannot export directly, but they contact the exporters in Mumbai and export diamonds through them.”
Speaking exclusively to Rapaport Magazine, Ashok Minawala, director of the All India Gems and Jewellery Trade Federation, is optimistic that the government is open to considering all reasonable demands by the industry. He shared, “The government is very open to paying heed to our suggestions and we are sure that wherever they can accommodate our requests, they would.”
In addition, the Gem & Jewellery Export Promotion Council (GJEPC) has been holding a series of GST awareness seminars across the country with the exhibitors at the India International Jewellery Show (IIJS) 2017. Meetings were held in Jaipur, Kolkata, Hyderabad and Ahmedabad, among other locations. The aim is to ensure that the exhibitors are GST-ready by the time of the show, which is scheduled to take place from July 27 to 31.
INDUSTRY DYNAMICS
According to Minawala, low-ticket items — reasonably priced, smaller diamonds —in India are doing better. The reason he cited could be the government’s policy, which makes it mandatory for customers to submit their Permanent Account Number (PAN) card details when making larger jewelry purchases, approximately above Rs. 200,000, approximately $3,100.
In terms of cut, round diamonds are witnessing good demand and colors from G to J are strong at the moment. “In the domestic market, we are seeing customers opting for VVS and VS when we talk of clarity,” Minawala shared.
Regarding international demand, Mehul Choksi, chairman Gitanjali Group, speaking with Rapaport News, believes that the first quarter in the U.S. wasn’t very good because of the impact of the on demand. He noted, “America is moving to buy more of SI1. There is less consumption for VVS and VS in the U.S. as of now. Demand is slowing down in dossiers as well.” Though he did not elaborate on this, Choksi shared his observation with regards to the change in the buying patterns of the American buyers.
However, Choksi feels that April and May have seen better buying. He addsed, “I think that the overall demand is crunching.” Referring to his views on the JCK show, Choksi shared, “This show, we witnessed extremely less foot traffic. In fact, traffic was almost 40 percent less as compared to the same show in 2016. Choksi strongly feels that this could be because of the show being held on weekdays. He added, “There was far lesser buying taking place at the show due to the poor economy in the first quarter of 2017.”
Elaborating on his views concerning the dynamics of the domestic market, Choksi minced no words, citing the decline in retail sales over the past two months. He shared, “There is a lot of confusion with regards to the GST implementation and this has led to a slowdown in the buying of jewelry at the moment.”
The industry is upbeat with the news of ALROSA setting up an office in Mumbai. According to Choksi, this should help the industry as most of the rough mines are in India. The Russian diamond miner though has sought tax neutrality from the government to set up its representative office in India and wants parity with Belgian levies. According to media reports, ALROSA has started making small allocations through its intermittent exhibition of rough diamonds in the special notified zone (SNZ) at the Bharat Diamond Bourse (BDB). The company sells large quantities through Dubai and Belgium. According to Sabyasachi Roy, executive director, GJEPC, diamond mining companies are seeking a similar business environment in India as in Dubai and Belgium. He pointed out that the current business climate allows business to go to Dubai and Belgium. But if the taxation issue is dealt with, the same business would come to India.
Article from the Rapaport Magazine - July 2017. To subscribe click here.