India looks to cut taxes for overseas diamond miners to boost trade
New Delhi/Mumbai — 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 have said.
The country’s commerce department, in a letter to the finance ministry, has sought to scrap levies and, instead, introduce a presumptive tax of 0.25% 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% tax, at par with those paid by local companies on their income, according to the Gem and Jewellery Export Promotion Council.
Slashing taxes will bring India in line with international centres 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 centres.
"This is our grudge and not the miners’ grudge as we want them to come and sell here," said Praveen Shankar Pandya, chairperson 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 (GST) on the import of rough diamonds to be reduced to 0.1% from the current 0.5% to 3% range, depending on the grade, the people said. While commerce ministry spokesperson Nitin Wakankar did not immediately respond to a call seeking comment, finance ministry spokesperson DS Malik said if a proposal has been received, it will be considered in due course.
Exports of gems and jewellery from India between April and March is estimated to remain around last year’s level of $43bn. An earlier target of 10% annual growth was scrapped due to a slowdown in global demand, the introduction of a 5% import tax by major buyer the United Arab Emirates; the roll-out of GST in July this year also hurt demand, according to council.
The trade ministry also expects a reduction in import duty on gold to 2% from the current 10% in the federal budget due in 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.