India’s rough diamond imports fell 4.7 percent in December from a year ago to $1.398 billion, a trade body said on Tuesday, as the scrapping of high value currency notes forced many small polishing units to idle their units. India is a global diamond polishing hub where 14 out of every 15 rough diamonds in the world are polished. In November, Prime Minister Narendra Modi scrapped Rs 500 and 1,000 banknotes, or 86 percent of the value of cash in circulation, as part of a crackdown on corruption, tax evasion and militant financing. The move disrupted diamond polishing in the country as small units mainly do business in cash.
The country’s exports of cut and polished diamonds jumped 22.5 percent in December to $1.478 billion, the Gem and Jewellery Export Promotion Council (GJEPC) said in a statement. “Demand for polished diamonds was good from the U.S. and European market for holiday season,” said a Mumbai-based exporter, who declined to be named.
To curb grey market and boost the organised players, GJEPC is expecting Finance Minister Arun Jaitley to reduce the import duty on gold to around 5 per cent in the upcoming Union Budget. “We are expecting the Finance Minister to reduce the import duty on gold to up to 5 per cent to boost the organised players in the country. Any duty on gold that is beyond 5 per cent encourages the grey market,” GJEPC Chairman Praveen Shankar Pandya told PTI.
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He said a high import duty of 10 per cent has hampered the export of jewellery due to blockage of high amount of capital and has increased probability of trafficking of gold through parallel channels into the country. “Currently, India processes 93 per cent of the world’s cut and polished diamonds. The rough diamond import attracts NIL duty. The subsequent sale to MSMEs, all located in Gujarat are also without any VAT. SMEs, after doing the various processes, then resale to exporters, which is also without any VAT. Labourers paid for processing diamonds are free of service tax. Hence, any levy of GST in this cycle will severely impact the eventual exports of diamond,” he said. GJEPC demanded the Customs allow job work for diamond, precious and semi-precious stones.
Job work is processing or working on goods supplied by another person to complete a part or whole of the process and can be undertaken for the initial process, intermediate process, assembly, packing or any other completion process or complete manufacturing. “Currently, job work scheme is available for other sectors. But there is no guideline specific to the gems and jewellery, which leads the industry players to import diamonds for cutting and polishing and undertaking other processing activities on job work basis,” Pandya said.
(With inputs from Agencies)