GJEPC recommends effective EoDB!
Gazing the stature of global Diamond Trading Hub
Recently The Gem & Jewellery Export Promotion Council (GJEPC) has casted their budget recommendations proposal for the budgetary process FY 2020- 2021. GJEPC attempted to attain the effective Ease of Doing Business to reach the focussed export target of US$75bn.
As of today, Gem & Jewellery (GJ) exports India volume is of US$40bn, contributes about 7% to India’s GDP and 12 % to Merchandise Exports basket India. As of today represents almost 6,000 exporters in the GJ sector and employs about 5mn workforce across India
In their submission GJEPC wish 1: Reduction in import duty on Cut and Polished Diamonds and Gemstones from 7.5% to 2.5%. GJEPC has noted an adverse impact upon the previously hiked up of duty from 5% to 7.5%!
GJEPC said, about 10% decline witnessed in export of diamond studded jewellery in the last financial year. Cutting and Polishing of diamond of 2 carat and above are severely getting impacted and Trading of small sized diamonds is also getting affected which will further make Indian diamond industry uncompetitive in the global market.
2: Reduction in Import Duty on Precious Metals, predominantly Gold, Silver & Platinum from 12.5% to 4%. In the row budget to also focus on, Bank Guarantee to the tune of more than 100% of basic customs duty on metals is submitted as bank guarantee in case of procurement of duty-free metals from nominated agencies or banks.
GJEPC has learnt that the high import duty has resulted in undue blockage of huge working capital of small and medium jewellery exporters; duty hike is indirectly creating a disincentive to the organized players in the industry, huge influx of metals through unofficial channel has also been reported!
Here GJEPC also cites, Transforming India’s Gold Market report of Niti Aayog, ‘Multiple increase in import duty on precious metal gold had resulted in gold coming in from countries such as South Korea and Malaysia, with whom India has signed Free Trade Agreements (FTAs), increasing the price arbitrage in the domestic markets. Cheaper import in the grey market encourages unofficial gold business in a big way, High Import Duty is, a: Hampering India’s export competitiveness, b: Job Loss & c: Shifting of Indian or foreign buyers to foreign markets!’
As of today India is manufacturing about 92% from the total global rough yet does not have a command over diamond trading of rough & polished diamond both! Defacto India has an edge to cater a diamond of any size, shape & colour to the world! Yet, rough diamond trading should ease and global rough players should be able to sale their rough at globally competitive norms.
In the context GJEPC suggest, 3: Amendments in Taxation Laws enabling sale of rough diamonds in SNZ, Mumbai.
India Diamond Trading Centre-Special Notified Zone (IDTC-SNZ) has been operational since December 2015 in Mumbai. As per Customs Circular No. 17/2015 dated 26.05.2015, Foreign Mining Companies or its trading arms (FMC) are permitted to display, trade & auction rough diamonds in SNZ.
On display of rough diamonds, there are no direct tax implications by virtue of exemption given under Section 9(1)(i) of the Income Tax Act, 1961 (exempting income of FMCs from display of uncut and unassorted diamonds at SNZ from the purview of Income Tax). However, there is no specific exemption for sale of rough diamonds from SNZ. Hence, presently the rough diamonds are only viewed or displayed at SNZ.
GJEPC wishes sale of rough diamonds shall be allowed on the lines of participation in an overseas exhibition, As per Notification No. 8/2016 dated 5 February 2016, there is no provision of charging of income tax, if foreign company imports rough diamonds into India for display or use at exhibition under ‘temporary import bond’.
In case, the Government of India, still wishes to tax the selling activity , without prejudice, should offer level playing field to FMCs or its trading arm (not having sales offices in India) by providing presumptive turnover linked tax rate of 0.125%. (Level playing field in terms of UAE, Belgium, Israel etc.)
Further GJEPC recommends:
4: Tax and Import Duty Refund Scheme for Foreign Tourist in India.
Foreign tourist’s arrival into the country, in past one decade, has increased manifolds Great potential in selling Indian jewellery to these tourists,
In absence of GST refund procedures as prevalent in Singapore, Malaysia, China, Thailand etc., they are buying it from other centres of world rather than India,
Industry is requesting for introduction of the Standard Operating Procedures (SoP) for Tax Refund for Tourists facilitating and enabling refund of GST paid on procurements made by foreign tourist in India.
It can help in increasing our exports & earning of foreign exchange to great extent,
Buying of jewellery from Indian retail always amount to value added jewellery sales & greater earning of foreign exchange for India.
5: E-Commerce in Gems and Jewellery Industry.
The use of ecommerce marketplace by the consumers worldwide is increasing day by day to order for variety of gems & jewellery items.
The Countries like China have realized the opportunities in cross border trade through online marketplace like Alibaba and are exporting different items worldwide through this platform. With this China has created huge employment both direct & indirect in manufacturing, packaging, logistics, technology sectors etc.
In the row GJEPC Recommendations are, i: Jewellery studded or otherwise, up to the value of US$ 800 will not be considered as precious items for the purpose of Courier Import Export Regulations. In most of the countries, there is no import duty on e-commerce parcels up to US$ 800 and there is no discrimination of precious/non-precious for e-commerce parcels.
ii: Being of small value and on account of advance receipt or secured payment, the requirement of filing of shipping bill by the exporter for e-commerce shipment up to value of US$ 800 should be waived and export should be allowed on the basis of invoice and self-declaration.
6. Introduction of a Job Work Model in Diamond, Precious and Semi-Precious Stones Industry.
India is one of the biggest players in the diamond and gemstone cutting & polishing activity.
Industry players in the competing jurisdiction are able to operate under a model wherein diamonds, precious and semi-precious stones can be sent to the job worker free of cost by the Foreign Principal for the sole purposes of processing activities and re-export thereafter.
There is no such enabling policy in India for such a job work model for diamonds which needs to be introduced as it is available to all other sectors,
The proposal job work model would offer an incremental opportunity to the Indian industry players to capitalize on the available global business opportunities
7: Proposal for Special Economic Zone is, i: Allowance of job work to SEZ units for DTA units & ii: Allowance of sale of gems and jewellery items from SEZ to DTA units. (Exclusively edited by Nayan Jani, Editor-Jewellery News India, JNI)
