Doubling of India’s polished diamond import duty to squeeze exports
A doubling of India’s import duty on polished diamonds will hurt Indian diamond exports, squeeze margins and potentially encourage smuggling into the country.
Indian Finance Minister Arun Jaitley, in a budget speech, announced on February 1 a doubling of the import duty on cut and polished diamonds, coloured gemstones and lab-grown diamonds, including half-cut and broken pieces. The proposed duty is 5 percent, up from 2.5 percent currently.
India is the world’s main centre for the manufacturing of diamonds in hubs such as Surat and Mumbai. The country uses the latest technologies and a highly skilled workforce to cut and polish imported rough diamonds which are then exported around the world.
India currently processes the vast majority of diamonds mined globally.
India’s gem and jewellery industry expressed disappointment over the move, fearing a slowdown in exports and a loss of global competitiveness.
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Pramod Agarwal, the newly elected Chairman of the Gem & Jewellery Export Promotion Council (GJEPC), said the decision would hamper “India’s chances of becoming an international diamond trading hub” as it “doesn’t provide India a level playing field vis-à-vis other peers such as Belgium, Dubai and Israel.”
Avi Krawitz, a senior analyst with Rapaport, tweeted on February 1: “India government to raise import duty on polished diamonds from 2.5 percent to 5 percent is shortsighted. Will push the industry underground and encourage smuggling into the country.”
In contrast, India’s domestic diamond trade will get a boost from a sharp cut in the Goods and Services Tax (GST) for diamonds to 0.25 percent from 3 percent, announced in January.
The decision by the GST Council to cut the tax can increase consumer demand for diamonds in the growing Indian market, according to Indian jewellers attending the recent Vicenza gold jewellery fair VICENZAORO.
“The cut in the GST is a measure than can help business in the domestic market but it will not impact international business,” said Pranay Shah of Intergold Europe N.V.
Words by David Brough
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