Fears India will lose leadership in diamond processing, shifting of manufacturing units to tax havens

With the government attempting to arrive at a final rate of the goods and services tax (GST) through consensus among stakeholders, the Gems & Jewellery Export Promotion Council (GJEPC) has demanded that the precious metals and stones industry be kept under the lowest rate slab.

According to GJEPC Chairman Praveenshankar Pandya, any adverse tax structure would result in India losing its leadership position in diamond cutting and processing. Currently, import of rough diamond attracts ‘nil’ duty, while exports of cut and polished diamond are under ‘zero’ duty regime.

“Thus, the entire gold and jewellery sector is currently under ‘nil’ duty regime. Any adverse duty levy on this sector would hit the entire value chain of diamond and jewellery sectors. Therefore we, based on a survey conducted over nine months across our 7,000 registered members, arrived at a conclusion that a recommendation should be sent to the government seeking exemption of gems and jewellery sector under GST,” said Pandya.

GJEPC also demanded that export transactions should not be subjected to any effective GST with regard to exports. All related consumption of raw materials, inputs and input services such as input of rough diamonds, gold, silver, platinum (through duty-free export promotion schemes) at the input level should continue to be free from levy of any import duty or GST. Pandya said all transactions, whether direct or indirect, for exports, should continue not to be taxed with any indirect taxes in the form of GST.

Meanwhile, the government is mulling a four per cent duty on gold and gold jewellery, which industry feels might be offset through a cut in import duty from the existing 10 per cent to six per cent.

As much as 93 per cent of India’s rough diamond imports get exported. For domestic consumption, precious metals jewellery (including studded jewellery and costume fashion jewellery) attracts a modest 1.25 per cent duty. India’s jewellery sector employs around one million people directly and 4.6 million of semi-skilled workers in various sectors that need to be protected, Pandey added.

GJEPC suggested similar tax treatment across the entire value chain including gold, diamond and colour gemstones.