New Delhi, India – India’s trade ministry is seeking a cut in taxes for overseas diamond miners to boost trading in the world’s largest hub for polishing the gems, people with knowledge of the matter said.
The commerce department in a letter to the finance ministry has sought to scrap levies and instead introduce a presumptive tax of 0.25 percent on diamond mining companies to lure such firms to sell the stones in special notified zones, the people said, asking not to be identified as the plan isn’t public. Currently, miners refrain from selling diamonds in India as it attracts as much as 33 percent tax, at par with those paid by local companies on their income, according to the Gem & Jewellery Export Promotion Council.
Slashing taxes will bring India at par with international centers such as Antwerp and Israel, cut out middlemen and boost supply of rough diamonds in the nation where 14 out of every 15 of the gems are polished. It will reduce costs for small merchants who have to travel or pay traders to buy the stones from the overseas centers.
“This is our grudge and not the miners’ grudge as we want them to come and sell here,” said PraveenShankar Pandya, chairman of the exporters’ group. “More miners coming to sell in these zones will help companies get a direct supply to goods rather than going through the middlemen.”
The trade ministry also wants the integrated goods and services tax on import of rough diamonds to be reduced to 0.10 percent from the current 0.5 percent to 3 percent range depending on the grade, the people said. While commerce ministry spokesman Nitin Wakankar did not immediately respond to a phone call seeking comment, finance ministry spokesman D.S. Malik said if a proposal has been received, it will be considered in due course.
Exports of gems and jewelry from India between April and March is estimated to remain around last year’s level of $43 billion. An earlier target of 10 percent annual growth was scrapped due to a slowdown in global demand, introduction of a five percent import tax by major buyer U.A.E and the roll out of the goods and services tax in July this year also hurt demand, according to GJEPC.
The trade ministry also expects a reduction in import duty on gold to 2 percent from the current 10 percent in the federal budget due February, the people said. The government had raised the import tax on gold three times in 2013 to curb imports, narrow a record current-account deficit and stop a slump in the rupee.
Written by Shruti Srivastava and Swansy Afonso