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GJEPC suggests safe harbour for sale of rough diamonds in Special Notified Zones, ET Retail


The Gem & Jewellery Export Promotion Council (GJEPC) has suggested in its pre-budget representation that the Centre should introduce Safe harbour for the sale of rough diamonds in Special Notified Zones (SNZs) so that India can become a trading hub like Dubai and Belgium.

This means that Indian diamond manufacturers will not have to travel abroad to get access to these trading hubs .Also, it is estimated that a total of 60% of the rough diamonds traded through auctions in the world and bought by Indian manufacturers will come to India for trading in SNZ.

Vipul Shah, chairman of the Gem & Jewellery Export Promotion Council (GJEPC), said, “Gem and Jewellery exports have been facing a challenging time on account of the economic downturn in key export markets, geo-political concerns, supply and demand side constraints in the global diamond industry, unavailability of precious metal in the country among others. The introduction of a Diamond Imprest License or reduction of import duty on cut & polished diamonds from 5% to 2.5% will help to cope with the impact of beneficiation policies undertaken in several natural diamond mining countries. This will give India a level playing field with competing countries like China, Vietnam and Sri Lanka. We are hopeful that with the additional support of the Government in terms of reduction in import duty of precious metals and MOOWAR scheme for gem and jewellery industry, the exports of gold jewellery will increase substantially in these challenging times.”

GJEPC has urged the government to consider its long pending demand for the sale of rough diamonds in Special Notified Zones (SNZs) through the Safe Harbour Rule and to expand the ambit of entities entitled to operate through SNZs. Currently only viewing session are held by mining countries at SNZs. SNZs were established with the prime objective that there would be easy availability of rough diamonds by creating efficiencies in the procurement of rough diamonds by allowing overseas diamond mining companies to sell their produce directly to Indian manufacturers through such SNZs.

Since there is tax uncertainty on the sale of the rough diamond at SNZ, 14 million carats of rough approximately valued at USD 2.93 billion have been sent to Mumbai SNZ on a consignment/viewing basis and 147 thousand carats of rough approximately valued at USD 87.3 million have been sent to SIDC SNZ on consignment/viewing basis.

It is estimated that a total 60% of the rough diamonds traded through auctions in the world and bought by Indian manufacturers could have come into India & traded.

It may also be noted that an Equalisation Levy of 2% is levied when the sale of rough diamonds is done through online auctions which is an additional cost to the manufacturers. The same can be avoided if the sale of rough diamonds starts in SNZ.

To further extend and expand the scope of SNZs, GJEPC has requested the government to also allow globally recognised diamond broking/ trading houses such as Bonas and I Hennig to similarly operate from such SNZs. Such trading houses are the focal point for the sale of diamonds of smaller miners which cumulatively comprise close to 35% of the global mining produce. Pertinently, such trading houses are already having a significant presence in other jurisdictions such as Dubai, Antwerp, etc. Allowing such trading houses to operate from SNZs with similar facilitation as provided to the diamond mining companies would ensure that India has more flexible, timely and cost-efficient access to such diamonds mined by smaller miners and is thus able to retain its position on the global roadmap as a leader in cutting and polishing of diamonds. The same would also insulate the Indian Manufacturers from global crisis such as the recent Russia-Ukrainian conflict during which, owing to India’s reliance on only major miners, including Alrosa.

GJEPC urged that the SNZ should be permitted to function as FTWZ too when it is not used by Foreign Mining Companies and entities so that the facilities created are fully utilised and the financial viability of the centres is maintained.

Many diamond-producing countries have introduced diamond beneficiation schemes, wherein they offer incentives for conducting downstream activities, such as cutting and polishing, that create additional economic value for a producer country beyond just the value of the rough diamonds it produces. Instead of processing diamonds of larger sizes (2-5 carat and above), the smaller-sized roughs are being exported to India, including semi-processed diamonds, by Indian diamantaires.

These diamonds are not considered rough diamonds instead they are treated as cut and polished diamonds and charged a basic custom duty of 5%. The current import/customs duty structure results in Indian exports of final polished diamonds being relatively less export competitive as compared to competing countries like China, Vietnam, and Sri Lanka where there are no such restrictions and hence, India loses out on such value-adding opportunities. Benefits under the scheme can result in substantial duty savings, can boost exports and can lead to huge employment generation.

GJEPC has requested the introduction of a Diamond Imprest Licence or reduction in import duty of cut & polished diamonds from 5% to 2.5%. Diamond Imprest Licence which was there in Foreign Trade policy was withdrawn after the import duty on CPD was abolished in the year of 2009. With the re-introduction of import duty on CPD in the year 2012, the scheme was not re-introduced. GJEPC is of the opinion that Indian diamond exporters above a certain export turnover threshold should be allowed to import at least 5%, (if not 10% as it was earlier) of the average export turnover of the preceding three years. This will provide a level playing field for Indian MSME diamond exporters with that of their larger peers. It will stop the flight of investment of Indian diamantaires to diamond mining destinations. It will give more employment in terms of diamond assorters and processing of semi-finished diamonds in the factories.

GJEPC has urged for the extension of the Manufacture & Other Operations in Warehouse (MOOWR) provisions to encompass the Gems & Jewellery Industry. The proposal includes the eligibility of precious, semi-precious stone, and diamond manufacturers under this framework. This initiative aims to facilitate smoother operations and foster growth within the industry.

As most of the rough-producing countries have either banned the export of rough like Colombia, Sri Lanka, Tanzania, Myanmar etc. or are discouraging exports of rough by imposing certain restrictive conditions or higher export duties like Afghanistan, Ethiopia, etc. This has left no option for the Indian G&J industry but to import finished gemstones for the manufacturing of jewellery and export thereof. Also, Coloured Gemstones are intermediate products for use in the manufacture of jewellery to fulfil export orders and the increase in duty has added to the disadvantage of competing with other competing countries. Therefore, imposing higher import duty on cut & polished gemstones would lead to reduced exports, and less employment generation in the jewellery industry thereby making survival difficult due to losing of competitive edge to other competing countries like China, Thailand etc.

The Council has also sought a reduction in import duty on precious metals Gold Bar (7108) from 15% to 4%. This will ensure that duty blockage of around Rs. 982.16 crore can be released resulting in more working capital in hand for industry. Untapped export potential for gold jewellery can be realised with more working capital (at least US$2 billion of US$ 11 billion in a medium period of 2 years). GJEPC has sought a reduction in import duty on Silver Bars (7106) from 10% to 4%; and a reduction in import duty on Platinum Bars (7110) from 12.5% to 4%.

The Gem & Jewellery sector has seen a boost in plain gold exports under the India-UAE CEPA. To maximize these benefits, Council also recommended the introduction of a mechanism like “Rates & Taxes Refund” through the EDI system similar to GST refund and the rate of refund should be aligned with the rates & taxes (i.e. Import Duty and GST) prevailing as on the day of export.

  • Published On Jan 20, 2024 at 08:58 AM IST

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