Indian Industry Seeks 15% Duty-Free Polished Import Quota

The Indian diamond and jewelry industry has a long list of policies that it wants the government to implement in the new fiscal year. Key among them are a 15 percent quota for duty-free imports of polished diamonds, the implementation of a presumptive tax and special zones for mining companies to sell rough diamonds.

The implementation of the presumptive taxation system based on an assumed profit margin of 2.5 percent is first on the list, said the GJEPC's business development head, Sanjay Kothari.

Speaking at a press conference on Tuesday ahead of the upcoming Indian government budget for the next fiscal year, Kothari noted that the current government offer of a presumptive tax based on an assumed 6 percent margin was not in line with reality and thus lay unaccepted.

Globally, Kothari noted, industry margins are 1- 4 percent depending where in the pipeline a company was situated and what is its largest market. A presumption of 2.5 percent profit would slot right into the median, he observed.

The establishment of special notified zones to enable mining companies to sell rough diamonds was stalled over the tax authorities request for clarification of the tax liability involved. The industry has asked that tax be levied only on the sold goods, allowing miners to take back the unsold goods.

None of the mining companies has a sales operation in India, the largest cutting and polishing center in the world. Sourcing rough diamonds from centers such as Antwerp and Israel increased the transaction cost, Kothari added.

The industry also seeks an import quota for polished diamonds to boost production. In the past polished diamond imports were free of duty, leading to the development of circular trading or round tripping. This takes place when the same parcel of diamonds is exported several times to get additional bank credit and government export benefits.

After the diamond industry asked the government to impose a 2 percent import duty on polished to curb this practice, it is now wants a duty-free polished diamond import quota of 15 percent of a company's exports in the previous year. This would ensure that polished imports were for legitimate commercial purposes only, the GJEPC maintained.

The industry also sought the deeming of the gem and jewelry industry as being "zero rated" for indirect taxes and wanted a refund of any such levies when product was finally exported. It also wanted better rupee export credit norms for gem and jewelry exports and a simplification of export procedures to reduce transaction costs overall.