MUMBAI : The Gem & Jewellery Export Promotion Council (GJEPC) has requested the Union Government to consider the introduction of the safe harbour rule for the sale of rough diamonds through Special Notified Zones (SNZs).
In its representation to the government, the association has also sought the introduction of a Diamond Imprest License and a reduction in import duty on cut & polished diamonds to 2.5%, a reduction in import duty on gold/silver/platinum bars to 4% and Introduction of a mechanism like “Rates & Taxes Refund” through EDI system similar to GST refund.
Vipul Shah, Chairman, GJEPC, said, “The industry has been facing a challenging time on account of an economic downturn in key export markets, global geo-political concerns, supply and demand side constraints in the global diamond industry, and unavailability of precious metal in the country. The recommendations by GJEPC will facilitate easy access to raw materials for the industry, especially for MSMEs.”
He said, “The introduction of the Safe harbour rule for sale of rough diamonds in Special Notified Zones (SNZs) can help India become a trading hub like Dubai and Belgium. Our diamond manufacturers will not have to travel abroad to get access to these trading hubs. It is estimated that a total of 60% of the rough diamonds traded through auctions in the world and bought by Indian manufacturers will come to India for trading.”
Shah further said, “Introduction of Diamond Imprest License or reduction of import duty on cut & polished diamond from 5% to 2.5% will help Indian diamond industry to cope up with the impact of beneficiation policies undertaken in a number of natural diamond mining countries. This will give India a level playing field with competing countries like China, Vietnam and Sri Lanka.”
It should be noted that the gem and jewellery industry of India sustains approximately 4.3 million jobs. It contributes about 10% to the country’s merchandise exports, and significantly impacts the overall economic growth.
As per the GJEPC recommendations to the Government of India, the safe harbour rule will expand the ambit of entities entitled to operate through SNZs which is currently limited to viewing sessions. It will also ensure an easy availability of rough diamonds by creating efficiencies in procurement of rough diamonds by allowing overseas diamond mining companies to sell their produce directly to Indian manufacturers through such SNZs.
According to GJEPC data, 14 million carats of rough approximately valued at $ 2.93 billion have been sent to Mumbai SNZ on consignment/viewing basis and 147 thousand carats of rough approximately valued at $ 87.3 million have been sent to SIDC SNZ on consignment /viewing basis. Furthermore, an Equalisation Levy of 2% on the sale of rough diamonds done through online auctions results in an additional cost to Indian manufacturers.
GJEPC has also requested the government to allow globally recognised diamond broking/ trading houses such as Bonas and I Hennig to operate from such SNZs as these trading houses are the focal point for sale of diamonds of smaller miners which cumulatively comprise close to 35% of the global mining produce. This decision is expected to ensure that India has a more flexible, timely and cost-efficient access to such diamonds mined by smaller miners.
Additionally, the gem and jewellery council has requested the government to introduce the Diamond Imprest Licence or reduction in import duty of cut & polished diamonds from 5% to 2.5%. This recommendation has been made regarding the smaller sized roughs ( 2 carat or below) because these diamonds are not considered rough diamonds, instead they are treated as cut and polished diamonds and charged basic custom duty of 5%. These bottle-necks make the Indian products less export competitive as compared to competing countries like China, Vietnam, and Sri Lanka where there are no such restrictions .
Apart from this, the council has also recommended the government to reduce the import duty on Gold Bars (7108), Silver Bars (7106) and Platinum Bars (7110) to 4%. Currently, the gold bars, silver bars and platinum bars attract an import duty of 15%, 10% and 12.5%, respectively. As per the GJEPC estimates, this decision will ensure that duty blockage of around Rs 982 crore can be released resulting in more working capital in hand for industry.