5 million people work in the G&J industry that is worth $40 billion and contributes around 7 per cent to our nation’s GDP
The GJEPC has recommended import duty on Cut and Polished Diamonds and Gemstones from 7.5 per cent to 2.5 per cent. 10 per cent decline has been witnessed in export of diamond studded jewellery in the last financial year. There has been a significant impact on cut and polished diamonds in 2ct sizes. Trading of small sized diamonds has also been affected which will further make Indian diamond industry uncompetitive in the global market.
The council has also recommended reduction in import duty on precious metals like gold, silver and platinum from 12.5 per cent to 4 per cent. High import duty has resulted in undue blockage of huge working capital of small and medium jewellery exporters. Duty hike is indirectly creating a disincentive to the organized players in the industry. Huge influx of metals through unofficial channel has also been reported. Bank Guarantee to the tune of more than 100% of basic customs duty on metals is submitted as bank guarantee in case of procurement of duty-free metals from nominated agencies/banks.
As per Niti Aayog’s report on Transforming India’s Gold Market: Multiple increases in import duty on precious metal gold had resulted in gold coming in from countries such as South Korea and Malaysia, with whom India has signed Free Trade Agreements (FTAs), increasing the price arbitrage in the domestic markets. Cheaper import in the grey market encourages unofficial gold business in a big way. High import duty is hampering India’s export competitiveness, leading to job loss and shifting of Indian/ foreign buyers to foreign markets.
The council has also asked for amendments in taxation laws to enable sale of rough diamonds in SNZ, Mumbai. India Diamond Trading Centre-Special Notified Zone (IDTC-SNZ) has been operational since December 2015 in Mumbai. As per Customs Circular No. 17/2015 dated 26.05.2015, Foreign Mining Companies or its trading arms (FMC) are permitted to display, trade, auction rough diamonds in SNZ. On display of rough diamonds, there are no direct tax implications by virtue of exemption given under Section 9(1)(i) of the Income Tax Act, 1961 (exempting income of FMCs from display of uncut and unassorted diamonds at SNZ from the purview of Income Tax). However, there is no specific exemption for sale of rough diamonds from SNZ. Hence, presently the rough diamonds are only viewed/displayed at SNZ.
Sale of rough diamonds shall be allowed on the lines of participation in an overseas exhibition. As per Notification No. 8/2016 dated 5 February 2016, there is no provision of charging of income tax, if foreign company imports rough diamonds into India for display or use at exhibition under ‘temporary import bond’. In case, the Government of India, still wishes to tax the selling activity , without prejudice, should offer level playing field to FMCs or its trading arm (not having sales offices in India) by providing presumptive turnover linked tax rate of 0.125%. (Level playing field in terms of UAE, Belgium, Israel etc.)
Foreign tourist’s arrival into the country, in past one decade, has increased manifolds. Hence, the GJEPC has recommended tax and import duty refund scheme for foreign tourist in India. There is great potential in selling Indian jewellery to these tourists. In absence of GST refund procedures as prevalent in Singapore, Malaysia, China, Thailand etc., they are buying it from other centres rather than India. Industry is requesting for introduction of the Standard Operating Procedures (SoP) for Tax Refund for Tourists facilitating and enabling refund of GST paid on procurements made by foreign tourist in India. It can help in increasing our exports & earning of foreign exchange to great extent. Buying of jewellery from Indian retail always amount to value added jewellery sales & greater earning of foreign exchange for India.
The use of ecommerce marketplace to order for variety of gems & jewellery items by consumers worldwide is increasing day by day. Countries like China have realized the opportunities in cross border trade through online marketplace like Alibaba and are exporting different items worldwide through this platform. With this, China has created huge employment both direct & indirect in manufacturing, packaging, logistics, technology sectors etc.
Recommendations in a Nutshell
- Jewellery, studded or otherwise, up to the value of US$ 800 will not be considered as precious items for the purpose of Courier Import Export Regulations. In most of the countries, there is no import duty on e-commerce parcels up to US$ 800 and there is no discrimination of precious/non-precious for e-commerce parcels.
- Being of small value and on account of advance receipt or secured payment, the requirement of filing of shipping bill by the exporter for e-commerce shipment up to value of US$ 800 should be waived and export should be allowed on the basis of invoice and self-declaration
- Introduction of a Job Work Model in Diamond, Precious and Semi-Precious Stones Industry. India is one of the biggest players in the diamond and gemstone cutting & polishing activity. Industry players in the competing jurisdiction are able to operate under a model wherein diamonds, precious and semi-precious stones can be sent to the job worker free of cost by the Foreign Principal for the sole purposes of processing activities and re-export thereafter. There is no such enabling policy in India for such a job work model for diamonds which needs to be introduced as it is available to all other sectors. The proposal job work model would offer an incremental opportunity to the Indian industry players to capitalize on the available global business opportunities
- Proposal for Special Economic Zone
- Allowance of job work to SEZ units for DTA units
- Allowance of sale of gems and jewellery items from SEZ to DTA units
News Source: diamondworld