Budget 2024: India promises safe harbour rates for diamond industry

Union Finance Minister Nirmala Sitharaman in her seventh consecutive Budget on Tuesday promised the introduction of safe harbour rates for foreign mining companies selling raw diamonds in the country.

“India is a world leader in the diamond cutting and polishing industry, which employs a large number of skilled workers. To further promote the development of this sector, we would provide for safe harbour rates for foreign mining companies selling raw diamonds in the country,” Sitharaman said in her Budget speech.

Safe harbour rates refer to predetermined and fixed tax rates that provide a level of certainty and stability for businesses. By implementing these rates, the government aims to simplify tax compliance for foreign mining companies, reducing the risk of tax disputes and creating a more attractive investment environment. This approach helps to streamline the taxation process, making it easier for foreign suppliers to operate in India without facing unexpected tax liabilities.

Though the finance minister has promised the introduction of safe harbour rates, the specific rate slabs are yet to be announced.

This initiative is expected to further cement India’s position as a world leader in the diamond cutting and polishing sector, which already employs a large number of skilled workers.

The diamond cutting and polishing industry in India has long been a cornerstone of the country's economic and artisanal landscape. With over 90 per cent of the world’s diamonds being processed in India, primarily in the city of Surat, the sector is renowned for its skilled workforce and intricate craftsmanship.

The industry provides employment to about 8 lakh workers in about 4,000 cutting and polishing units, according to media reports.

The new policy aims to attract more foreign raw diamond suppliers by providing them with predictable and favourable tax rates, thereby ensuring a steady influx of raw materials essential for the industry’s growth.

The introduction of safe harbour rates is part of a broader strategy to support and expand the diamond industry in India. This includes initiatives to upgrade technology, improve skill training for workers, and foster partnerships between domestic companies and international players. The government hopes that these measures will lead to increased investment, job creation, and overall economic growth.