Diamond units seek service tax exemption

The diamond industry of Surat has opposed the proposed move to bring the diamond cutting and polishing sector under the service tax net.

According to a recent government notification, all diamond units involved in indirect manufacturing of diamonds are eligible to pay service tax. The levy would be at the rate of 10.2 per cent of the labour charges.

"Considering the scope of the diamond industry, the amount of tax would be huge. The industry is in no position to bear this burden," Nanu Vanani, president, Surat Diamond Association, said.

"The diamond cutting & polishing sector would be badly hit if service tax is imposed on it. Due to increased competition from China, the industry is operating with very small margins. Any additional tax would only create more problems with the industry," he said.

"Barring a very small percentage, all the diamonds that are cut or polished in Surat are exported and, hence, attract no taxes. The industry provides employment to lakhs of people, and earns foreign exchange for the country. Instead of supporting the sector, the government proposes to cover it under the service tax," the association president rued.

"In the interest of the diamond industry, the government should immediately withdraw the notification and exempt the diamond cutting and polishing sector from service tax. We are holding talks with the Gem & Jewellery Export Promotion Council (GJEPC) and plan to raise the issue at the highest level in the government," he added.

Chandrakant Sanghvi, regional convenor, GJEPC, Gujarat, also expressed concern at the move.

"The diamond cutting and polishing sector is facing cut-throat competition from China, and other countries. The sector has survived and continued to grow, but the move to bring it under the service tax net, will have an adverse impact on it. The government should consider the situation of the sector, and exempt it from the service tax," he said.