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Diamond traders urge FM Sitharaman to slash import duty on cut and polished diamonds


In a bid to bring back business from Antwerp and Dubai, the Indian diamond traders have urged the finance minister Nirmala Sitharaman to slash import duty on cut and polished diamonds from 7.5% to 2.5% and allow the special notified zones (SNZs) set up in Bharat Diamond Bourse and Surat Diamond Bourse to start diamond trading.

At present, diamond traders can see diamonds at SNZs and place order but cannot directly buy them. If this is allowed, the transaction cost of diamond trade will come down significantly as they do not have to buy diamonds through middlemen based in Antwerp.

“Rough diamonds are sent to SNZs by miners for viewing by customers in India. After viewing, diamonds are shipped back to Dubai or Antwerp by SNZ. Sales cannot be made in India because if they do, they would be considered permanent entities as per IT Act and would have to pay income tax on the sale. The same goods are then shipped back to India via offices in Dubai or Antwerp, increasing cost for the importer even though India manufactures 80% of the world’s production,” said Colin Shah, chairman, GJEPC.

As much as 60% of the rough diamond is routed through Antwerp or Dubai, which increases the rough cost for Indian trade.

“We have asked the FM to introduce turnover-linked tax on sale of rough diamonds in SNZs. Rough diamonds would be sent to SNZs in India by miners for viewing. If customers choose to confirm, invoice to be made at same point in India within SNZ. Miners will be required to pay a turnover tax not exceeding 0.16%, which is at par with the rate in Belgium. Rough diamond sales will move to India as all ultimate buyers are here. Tax collection of the government will increase and will also bring down logistical and foreign office costs for Indian firms as the hub moves to India. FM has assured the trade that she will look into the matter”, explained Shah.

The diamond trade also brought up the issue of higher import duty on cut and polished diamonds. Vipul Shah, vice-chairman, GJEPC, said that earlier, majority of cut and polished diamonds used to come back to India as India was the main distribution hub.

Duty on polished diamonds was raised to 7.5% in September 2018. This includes duty on diamonds exported and then reimported. “The duty should be reduced to 2.5%. These diamonds, which are manufactured abroad, are now not being imported to India and are instead routed to Hong Kong and Dubai,” said the GJEPC vice-chairman.

“This duty should be applied on all polished diamond imports, irrespective of diamonds manufactured abroad. As a result, India’s status as a polished diamond hub will be strengthened as all distribution would be out of India. Alternative centres like Hong Kong will become less important,” he added.

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