GJEPC Urges Government to Permit Diamond Rough Sale via SNZ, Cut Import Duty to 2.5%
Published on: January 19, 2024.
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The Gem & Jewellery Export Promotion Council (GJEPC) is urging the Union Government to implement the safe harbour rule for the sale of rough diamonds in Special Notified Zones (SNZs). GJEPC has also presented a list of recommendations to the government, including the introduction of a Diamond Imprest License and a reduction in import duty on cut & polished diamonds to 2.5%. They have also proposed a mechanism similar to GST refund for “Rates & Taxes Refund” through EDI system and a reduction in import duty on gold/silver/platinum bars to 4%.
According to Vipul Shah, Chairman of GJEPC, the industry is facing challenges due to uncertainties in the global economy, supply and demand constraints in the diamond industry, and limited availability of precious metals in India. The implementation of the safe harbour rule in SNZs can transform India into a trading hub similar to Dubai and Belgium. This would eliminate the need for Indian diamond manufacturers to travel abroad to access these trading hubs.
It is estimated that around 60% of rough diamonds, which are traded through auctions worldwide and bought by Indian manufacturers, will be traded in India if the safe harbour rule is introduced. This will provide easy access to raw materials for the industry, particularly for MSMEs.
The introduction of the Diamond Imprest License or a reduction in import duty on cut & polished diamonds from 5% to 2.5% will help the Indian industry compete with other countries such as China, Vietnam, and Sri Lanka. GJEPC emphasizes that these policies will level the playing field for Indian diamond manufacturers and mitigate the impact of beneficiation policies adopted by other natural diamond mining countries.
The gem and jewellery industry in India plays a significant role in the country’s economy, contributing approximately 10% to merchandise exports and employing around 4.3 million people.
GJEPC has proposed that the safe harbour rule should expand the scope of entities allowed to operate through SNZs, which currently only includes viewing sessions. This will enhance the availability of rough diamonds by streamlining the procurement process and enabling overseas diamond mining companies to directly sell their produce to Indian manufacturers through SNZs.
According to GJEPC data, approximately 14 million carats of rough diamonds, valued at around $2.93 billion, have been sent to the Mumbai SNZ on a consignment/viewing basis. Additionally, 147 thousand carats of rough diamonds, valued at approximately $87.3 million, have been sent to the SIDC SNZ. GJEPC also highlights that the 2% Equalisation Levy imposed on online auction sales of rough diamonds adds an extra cost burden to Indian manufacturers.
GJEPC is also requesting the government to permit globally recognized diamond broking/trading houses, such as Bonas and I Hennig, to operate from SNZs. These trading houses are crucial for the sale of diamonds from smaller miners, which collectively account for about 35% of global mining production. This decision is expected to provide India with greater flexibility, efficiency, and accessibility to diamonds from smaller miners.
Furthermore, GJEPC recommends a reduction in import duty on Gold Bars (7108), Silver Bars (7106), and Platinum Bars (7110) from the current rates of 15%, 10%, and 12.5% respectively, to 4%. This move would release blocked duty of approximately Rs 982 crore, providing the industry with additional working capital.
Overall, GJEPC’s proposals aim to improve the ease of doing business for the gem and jewellery industry, enhance competitiveness, and support its growth in India.
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