The Union Budget 2024-2025, which is scheduled to be presented by Finance Minister Nirmala Sitharaman, on February 1, has garnered several recommendations from the gems and jewellery sector, which is facing headwinds due to economic downturn in key export markets, geo-political concerns, as well as supply and demand constraints. The gems and jewellery industry contributes about 10% to the country's merchandise exports and significantly impacts the overall economic growth.
The Gem & Jewellery Export Promotion Council (GJEPC), representing India's global gem and jewellery trade, has proposed several measures such as a reduction in import duties on gold, silver, and platinum bars; introduction of diamond imprest licence as well as a reduction in import duty on cut and polished diamonds; and safe harbour rule for the sale of rough diamonds in special notified zones (SNZs). The body has also proposed the introduction of a mechanism like “rates & taxes refund” through EDI system similar to GST refund.
Vipul Shah, Chairman, GJEPC, says, “Gem and Jewellery exports have been facing a challenging time on account of the economic downturn in key export markets, geo-political concerns, supply and demand side constraints in global diamond industry, unavailability of precious metal in the country among others. GJEPC’s pre-Budget proposals will facilitate easy access to raw materials for the industry, especially for MSMEs.”
Here’s what GJEPC expects from Union Budget 2024:
Sale of rough diamonds in SNZs
GJEPC has urged the government to consider its long pending demand of the sale of rough diamonds in special notified zones (SNZs) through safe harbour rule and to expand the ambit of entities entitled to operate through SNZs. By introducing safe harbour rules for the sale of rough diamonds in the SNZs, India can become a trading hub like Dubai and Belgium and diamond manufacturers will not have to travel abroad to get access to these trading hubs, says Vipul Shah.
Also, it is estimated that a total of 60% of the rough diamonds traded through auctions in the world and bought by Indian manufacturers will come to India for trading. It may also be noted that an equalisation levy of 2% is levied when the sale of rough diamonds is done through online auctions which is an additional cost to the manufacturers. The same can be avoided if the sale of rough diamonds starts in SNZ.
Facilitate rough diamond broking and trading cos at SNZ
In a bid to further extend and expand the scope of SNZs, GJEPC requested the government to also allow globally recognised diamond broking and trading houses such as Bonas and I Hennig to also similarly operate from such SNZs. Such trading houses are the focal point for the sale of diamonds by smaller miners which cumulatively comprise close to 35% of the global mining produce.
Reduction in import duty of cut & polished diamonds from 5% to 2.5%
The agency has also proposed introduction of diamond imprest licence or reduction of import duty on cut & polished diamond from 5% to 2.5%, which will help to cope with the impact of beneficiation policies undertaken in several natural diamond mining countries. This will give India a level playing field with competing countries like China, Vietnam, and Sri Lanka.
The Diamond Imprest Licence which was there in foreign trade policy was withdrawn after the import duty on CPD was abolished in the year of 2009. With re-introduction of import duty on CPD in the year 2012, the scheme was not re-introduced. The GJEPC thinks that Indian diamond exporters above a certain export turnover threshold should be allowed to import at least 5%, (if not 10% as it was earlier) of the average export turnover of the preceding three years. This will provide a level playing field for Indian MSME diamond exporters with that of their larger peers.
Cut in import duty on precious metals to 4%
The council has also sought a reduction in import duty on precious metals Gold Bar (7108) from 15% to 4%. This will ensure that duty blockage of around ₹982.16 crore can be released resulting in more working capital in hand for industry. Untapped export potential for gold jewellery can be realised with more working capital (at least $2 billion of $11 billion in the medium period of 2 years). GJEPC has sought a reduction in import duty on silver bars (7106) from 10% to 4%; and reduction in import duty on platinum bars (7110) from 12.5% to 4%.
Introduction of “Rates & Taxes Refund” through EDI system similar to GST refund
The gem & jewellery sector has seen a boost in plain gold exports under the India-UAE CEPA. To maximise these benefits, the council also recommended the introduction of a mechanism like “Rates & Taxes Refund” through EDI system similar to GST refund and the rate of refund should be aligned with the rates & taxes (i.e. Import Duty and GST) prevailing as on the day of export.
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