GST Revision in Rough Diamonds Welcomed, Seeks 5% Labour Levy Abolishment
Welcoming the Goods and Services Tax (GST) Council’s decision to revise the three% tax on one of the varieties of imported rough diamonds to 0.25%, the Gems & Jewellery Export Promotion Council (GJEPC) has sought additional benefits.
Since its rollout in July, the GST Act had levied two different rates on revenue from rough diamonds. Of these, non-industrial or 'gem quality' of rough diamonds attract a rate of 0.25% while industrial and unsorted rough diamonds were levied a three% GST.
These rough diamonds have been globally categories into three codes wherein non-industrial rough diamonds carry the 7102.31 code, which attracted 0.25% GST, while the rest were categorised in 7102.10 and 7102.21 codes which attracted three% GST.
According to industry sources, the two separate rates had led to imported diamonds being blocked at customs subject to clearance, thereby impacting business for at least a fortnight or so.
“Earlier there was no import duty on rough diamonds. Moreover, when rough diamonds are imported under a particular code, the same is scrutinised and at times undergoes change in category by the customs officials. Since there was no duty levy earlier, this did not result in any disputes between customs and diamond importers. However, post GST this had led to import becoming more cumbersome and rising disputes,” said Dinesh Navadia, regional chairman of Gems & Jewellery Export Promotion Council (GJEPC).
Since July till now, rough diamond importers had seen an average delay of 15 days in movement of stocks which led to higher interest payment on working capital.
But now with the parity in all rough diamonds attracting the same rate of 0.25%, Navadia hopes stocks will start moving again rapidly and lead to lesser disputes with custom officials on coding of imported rough diamonds.
However, the industry is still pressing for couple of more demands from the government and GST Council. Among these is the abolishment of GST for business-to-business (B2B) transactions as well as removal of the five% GST on labour.
“Out of the 160 countries where a GST like single tax regime is going on, 38 countries deal in diamonds including the likes of Belgium and Netherlands. However, these countries do not a tax levied on B2B transactions but only on B2C. We have made the same demand from the government to provide relief from taxation for B2B,” said Navadia.
On the other hand, the industry has also sought removal of the five% GST on labour. GJEPC has argued that since rough diamond imports stand at roughly Rs 1 lakh crore and the same diamonds when polished and exported stand at Rs 1.48 lakh crore, the additional Rs 48000 crore tends to be the foreign exchange earned by the government.
With over 95% of the imported rough diamonds being exported, the government does not need to levy tax on labour for an industry which is labour intensive since it already earns revenue through foreign exchange, GJEPC has stated in its communication to the government.