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GJEPC Calls For GST-Free Process Pipeline For Diamonds, Gemstones

GJEPC Chairman Praveenshankar Pandya

While applauding the Indian government’s recent decision to reduce the goods and services tax (GST) rate on unsorted and industrial rough diamonds from 3 to 0.25 percent, the Gem & Jewellery Export Promotion Council (GJEPC), however, again said that the intra-industry movement of both rough and polished diamonds, as well as coloured gemstones, should be exempted from GST.

GJEPC Chairman Praveenshankar Pandya observed, “Diamonds go through several stages in their processing and also change several hands while doing so. The imposition of GST (which is refundable after the stones have been exported) at every transaction or dealing is leading to bottlenecks and the blockage of capital. Many small units do not have the necessary cash flow or loans from banks to support the immediate payment of GST.”

The GJEPC Chairman added, “As a result they have reduced manufacturing, something that is evident from the decline of exports over the last two months.

Pandya went on to say, “No other competing diamond processing country has this type of system of levying of GST and refund after exports. In other countries with similar diamond dispensations, like Belgium or Israel, transactions taking place between a diamond dealer, manufacturer and exporter are controlled and monitored by allotting a special GST number.  Any transaction taking place inside the group with such a GST number is exempted from payment of GST, whereas transactions outside this circle are taxed at the normal GST rate.”

The GJEPC Chairman said the gem and jewellery trade was not looking for any exemptions, but simply seeking a system that is in sync with practices in competing export-oriented processing centres. He noted that 94 percent of all diamonds processed in India are exported.

Pandya said, “The Coloured gemstone industry, which is similar in character and processes to the diamond industry, is also facing a similar problem and needs to be covered under such an exemption scheme too.”

Listing other industry woes, Pandya noted that the imposition of 3 percent GST on the import of gold had led to an issue with the availability of gold for export production of jewellery. “The nominated (gold importing) agencies provide gold to the export industry with a nominal commission and premium, which is based on their expenses and risk perception. However, with exporters now having to tie up their working capital as they pay 3 percent GST on the cost of gold subject to a refund upon export, the perceived financial risk has gone up. Premiums being charged by the nominated agencies have, consequently, shot up.”

Pandya called for the government to accept the GJEPC’s recommendation of a bank guarantee from the exporter, which would stand redeemed upon export, being accepted in lieu of an actual payment of GST.

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