The government is likely to withdraw the two per cent import duty on coloured gemstones and make it nil. The import duty on a par with cut and polished diamonds was levied for the first time in last Budget by then finance minister, Pranab Mukherjee.
“I am not in favour of the two per cent import duty on coloured gemstones. Hence, I am taking up the issue with the finance minister (to consider it’s withdrawal),” said Anand Sharma, Union commerce minister, on the sidelines of an event in Mumbai.
Despite having proved mettle in diamond jewellery processing and exports with around $42 billion worth of annual turnover in foreign currency, India’s presence in fashion accessories is insignificant.
“Despite having a large consumer base within the country and huge potential for exports, India’s share in global trade of fashion accessories is minuscule. And, hence, we need to do more,” he added.
Stepping ahead in that direction, the government has shortlisted four countries for importing gemstones directly, including Myanmar, Namibia and Brazil. Currently, colour gemstones are imported from a number of mines and trading companies in Africa, Russia and a host of other countries. Sharma, however, said that the government would facilitate a favourable policy environment for import of coloured gemstones.
The Union Budget for 2011-12 also proposed to levy 18.5 per cent minimum alternative tax (MAT) on the book profits of units operating in special economic zones (SEZ). The levy, however, proved a barrier for units operating in SEZs and narrowed down benefits with the units outside the SEZs. Hence, the government also plans to withdraw MAT in consultations with other ministries.
“There has to be a predictability and stability of policy particularly for the investment which has come in and units that have got established. Hence, I am going to take up MAT also with the concerned ministry,” Sharma added.
Jewellery exporters in the domestic tariff area (DTA) - places outside the SEZs - are offered several incentives under the foreign trade policy such as the freedom to set up the unit anywhere and no obligation to be net foreign exchange earners. While SEZ units have been enjoying the advantage of zero tax liability for five years, they were thus, prepared to give up benefits of export promotion schemes which vary between three and five per cent of the export value.
Additionally, SEZ units were also enjoying benefits of 50 per cent exemption for the next five years and another 50 per cent exemption on re-invested profits in the following five years. The withdrawal of MAT would provide a breather to SEZ units.
