GJEPC’s Recommendations for Union Budget 2024-25

Advocates the Government to Propel Gem & Jewellery Exports 

 The Gem & Jewellery Export Promotion Council (GJEPC), representing India’s global gem & jewellery trade, has proposed several recommendations to the Government ahead of the upcoming budget. India’s gem and jewellery industry heavily relies on imports for its raw materials, including gold, diamonds, silver, and colored gemstones. 

These materials are brought into the country and undergo either cutting and polishing or are transformed into finished jewellery before being exported worldwide. This thriving industry sustains approximately 4.3 million jobs, contributes about 10% to the country’s merchandise exports, and significantly impacts the overall economic growth.  

India has established itself as the leading choice for sourcing gems and jewellery on a global scale. However, to uphold this position of prominence, the industry must remain competitive in the international market. It requires strategic policy interventions that adapt to the evolving business landscape within the sector.  

Vipul Shah, Chairman, GJEPC, said, “Gem and Jewellery exports have been facing a challenging time on account of 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. By introducing Safe harbour rule for sale of rough diamonds in Special Notified Zones (SNZs), India can become a trading hub like Dubai and Belgium and our diamond manufacturers will not have to travel abroad to get access to these trading hubs. 

Also, it is estimated that total 60% of the rough diamonds traded through auctions in the world and bought by Indian manufacturers will come to India for trading. 

“Introduction of Diamond Imprest License or reduction of import duty on cut & polished diamond from 5% to 2.5% will help to cope up the impact of beneficiation policies undertaken in a number of natural diamond mining countries. This will give India a level playing field with competing countries like China, Vietnam and Sri Lanka. 

We are hopeful that with the additional support of the Government in terms of reduction in import duty of precious metals and Moowar scheme for gem and jewellery industry, the exports of gold jewellery will increase substantially in these challenging times.” 

Sale of rough diamonds in Special Notified Zones (SNZs):

GJEPC has urged the Government to consider its long pending demand of 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. 

Currently only viewing session are held by mining countries at SNZs. SNZs were established with the prime objective that there would be easy availability of rough diamonds by creating efficiencies in procurement of rough diamonds by allowing overseas diamond mining companies to sell their produce directly to Indian manufacturers through such SNZs. 

Since there is tax uncertainty on sale of rough diamond at SNZ, 14 million carats of rough approximately valued at USD 2.93 billion have been sent to Mumbai SNZ on consignment/viewing basis and 147 thousand carats of rough approximately valued at USD 87.3 million have been sent to SIDC SNZ on consignment/viewing basis. 

It is estimated that total 60% of the rough diamonds traded through auctions in the world and bought by Indian manufacturers could have come into India & traded. It may also be noted that an Equalisation Levy of 2% is levied when the sale of rough diamonds done through online auctions which is an additional cost to the manufacturers. The same can be avoided if sale of rough diamonds start in SNZ. 

Facilitate Rough Diamond Broking and Trading Companies at SNZ:

With a view to further extend and expand the scope of SNZs, GJEPC requested the Government to also allow globally recognised diamond broking/ trading houses such as Bonas and I Hennig to also similarly operate from such SNZs. 

Such trading houses are the focal point for sale of diamonds of smaller miners which cumulatively comprise close to 35% of the global mining produce. Pertinently, such trading houses are already having a significant presence in other jurisdictions such as Dubai, Antwerp, etc. 

Allowing such trading houses to operate from SNZs with similar facilitation as provided to the diamond mining companies would ensure that India has a more flexible, timely and cost-efficient access to such diamonds mined by smaller miners and is thus able to retain its position on the global roadmap as a leader in cutting and polishing of diamonds. 

The same would also insulate the Indian Manufacturers from global crisis such as the recent Russia-Ukrainian conflict during which, owing to India’s reliance on only major miners, including Alrosa. 

GJEPC urged that the SNZ should be permitted to function as FTWZ too when it is not used by Foreign Mining Companies and entities so that the facilities created are fully utilised and financial viability of the centres are maintained. 

Introduction of Diamond Imprest Licence or reduction in import duty of cut & polished diamonds from 5% to 2.5%:

Many of diamond producing countries have introduced diamond beneficiation scheme, wherein they offer incentives for conducting downstream activities, such as cutting and polishing that create additional economic value to a producer country beyond just the value of the rough diamonds it produces. 

In lieu of processing of diamonds of larger sizes (2-5 carat and above) the smaller sized roughs are being exported to India, including semi processed diamonds, by Indian diamantaires. These diamonds are not considered rough diamonds instead they are treated as cut and polished diamonds and charged basic custom duty of 5%. 

The current import/customs duty structure results in Indian exports of final polished diamonds relatively less export competitive as compared to competing countries like China, Vietnam, and Sri Lanka where there are no such restrictions and hence, India loses out on such value-adding opportunities. Benefits under the scheme can result in substantial duty savings, can boost exports and can lead to huge employments generation. 

GJEPC has requested the introduction of Diamond Imprest Licence or reduction in import duty of cut & polished diamonds from 5% to 2.5%. 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. 

GJEPC is of the opinion 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 preceding three years. 

This will provide level playing field for Indian MSME diamond exporters with that of their larger peers. It will stop flight of investment of Indian diamantaires to diamond mining destinations. It will give more employment in terms of diamond assorters and processing of semi-finished diamonds in the factories. 

Manufacture & Other Operations in Warehouse (MOOWR): 

GJEPC advocates for the extension of the Manufacture & Other Operations in Warehouse (MOOWR) provisions to encompass the Gems & Jewellery Industry. The proposal includes the eligibility of precious, semi-precious stone, and diamond manufacturers under this framework. This initiative aims to facilitate smoother operations and foster growth within the industry. 

Reduction in import duty of Cut and Polished Gemstones from 5% to 2.5%: 

As most of the rough producing countries have either banned export of rough like Colombia, Sri Lanka, Tanzania, Myanmar etc. or are discouraging exports of rough by imposing certain restrictive conditions or higher export duties like Afghanistan, Ethiopia, etc. 

This has left no option for the Indian G&J industry but to import finished gemstones for manufacturing of jewellery and export thereof. Also, Coloured Gemstones are intermediate product for use in manufacture of jewellery to fulfil export orders and the increase in duty has added to the disadvantage to compete with other competing countries. 

Therefore, imposing higher import duty on cut & polished gemstones would lead to reduced exports, fewer employment generation in jewellery industry thereby making survival difficult due to losing of competitive edge to other competing countries like China, Thailand etc. 

Reduction in import duty on precious metals to 4%: 

The Council has also sought reduction in import duty on precious metals Gold Bar (7108) from 15% to 4%. This will ensure that duty blockage of around Rs. 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 US$2 billion of US$ 11 billion in medium period of 2 years). GJEPC has sought 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 a mechanism like “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 maximize these benefits, Council also recommended 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.