Plan to make India diamond hub faces hurdles

The plan to make India the second Antwerp, the world’s biggest diamond trading hub, is facing inter-ministerial hurdles even as the sector is limping back to growth in exports. Although the country’s leading gems and jewellery traders, dealers and exporters are ready to grab a significant portion of the $25-billion market, key changes are required in the country’s Income Tax Act and Customs Act.

Official sources told Business Standard that even though the Ministry of Commerce and Industry is eager to expedite the issue in order to promote diamond exports, the proposal is stuck with the Ministry of Finance, which cannot afford to offer any more sops at this stage.

Belgium, China and Dubai offer sops to the diamond industry.

“Creation of diamond bourses is facing hurdles due to lack of effective government policies. The government needs to chart out policies for easy transaction of diamonds similar to international norms. Investors would get attracted only when adequate sops are provided,” Vasant Mehta, chairman, Gem and Jewellery Export Promotion Council (GJEPC) said.

The council has recommended a presumptive turnover-based tax scheme of 2-3 per cent as followed in international trading hubs such as Belgium and Israel. Mehta said turnover tax would be a better monitoring tool that would result in increasing revenues for the government. Turnover taxation regime is usually followed in low profit high volume industries.

The industry has also suggested the government to allow the entry of diamonds on consignment basis else foreign investors would not find it attractive enough to trade in the country.

While launching the Foreign Trade Policy 2009-14 in August, Commerce and Industry Minister Anand Sharma had said the government plans to establish more diamond bourses in the coming years.

“We require a diamond bourse followed by government policies to ensure its smooth functioning. Currently, rough diamonds go directly to the trading hubs. India and Israel are producers of polished diamonds and the market is in the US. But places such as Belgium, China and Dubai are earning billions of dollars being the leading diamond trading hubs. India deserves to get its share,” said Sabyasachi Ray, executive director, GJEPC.

Exports of gems and jewellery is expected to register positive growth post Christmas and the festive season, experts said.