The move will encourage setting up of diamond bourses.
Gems and jewellery sector has demanded rationalisation in transaction tax to attract foreign participation before commencing trade on international diamond bourse.
Reacting to the Commerce Minister Anand Sharma’s announcement on establishing international diamond trading bourses in India, Praveen Shankar Pandya, Chairman of Diamond India, said, “Merely setting up bourses for international repute is not likely to serve any purpose as global players would not come to India for rough diamond sales until the government rationalises duty.”
| HEAVY DUTY |
| * The demand assumes significance as no global miner, including the giants like Rio Tinto and De Beers, would like to auction rough diamond in India with higher duty |
| * Rather, the miners would prefer to shift to countries with “zero” tax regime like Dubai |
| * As per existing norms, transaction tax is levied between 2-3 per cent. Over and above, the Maharashtra government also levies 1% of VAT on diamond sales |
The demand assumes significance as no global miner, including the giants like Rio Tinto and De Beers, would like to auction rough diamond in India with higher duty. Rather they would prefer to shift to the countries with “zero” tax regime like Dubai.
Today, Indian processors participate in rough diamond auction in Dubai and thus, jobs are shifting from India, the world’s largest diamond cutter and polisher, to Dubai, the emerging trading hub in the West Asia.
As per existing norms, transaction tax is levied between 2-3 per cent depending upon types of diamond conceptualised for sale in international diamond bourses in India as against 0.25 per cent presumptive tax levied in the global trading hubs including Israel and Belgium. Over and above, the Maharashtra government has also levied one per cent of value added tax (VAT) on diamond sales.
The industry, however, had suggested the government to rationalise turnover tax at one per cent, at which, Pandya is confident to attract global participation.
“We had asked from the government to adopt measures to make India an international diamond trading hub. The government has just initiated our proposal with setting up diamond bourses across the country. But, a lot more initiatives need to be taken to make it truly successful,” Pandya added.
While announcing the Foreign Trade Policy on Thursday, the government intended to establish international diamond bourses. The industry is already setting up one such bourse in Mumbai which is nearing completion. On successful commencement of trading in Mumbai, the industry or the government may set up other bourses in other centres like Ahmedabad, Surat, Kolkata and Hyderabad.
However, Gems & Jewellery Export Promotion Council (GJEPC), the trade body set up under the Ministry of Commerce, is awaiting the blueprint and planning to study the facilities provided for such bourses. Meanwhile, Vasant Mehta, chairman of GJEPC, agreed on rooms for such bourses in other diamond processing centres.
The important point is not as to how many bourses India is establishing. But, how the government is making the environment conducive for global participants is more important. Even one such bourse can serve India’s purpose provided the country succeeds in attracting global players here, Pandya added.
Over 60 per cent of global roughs are cut and polished in India while over 90 per cent of small and medium size rough is processed here.
According to data compiled by the GJEPC, total import of rough diamonds declined 25 per cent in dollar terms (16 per cent in rupee value) at $848 million (Rs 4,152 crore) in July this year as compared to $1,138 (Rs 4916 crore) in the same month last year.
