(Press Release)
NEW DELHI – A delegation comprising Praveenshankar Pandya, the chairman of the GJEPC, and other industry representatives met with Shri Arun Jaitley, Hon’ble Union Minister of Finance of the government of India to discuss some of the critical issues facing the gems and jewelry industry in India and suggest appropriate steps to solve them.
Many of the issues raised during the discussions were related to the taxation policy of the government, with the chairman suggesting reforms that would enhance the ease of doing business for the industry. He also called on the Finance Minister to take measures that create certainty regarding tax provisions and reduce the quantum of tax-related litigation. The Hon’ble Minister heard the views of the industry and assured them that the government will look into the same.
The delegation requested the introduction of a special turnover tax regime for the diamond industry with 0.75 percent tax on sales turnover (computing net income as 2.5 percent of the turnover, available till 6 percent of income). This would be along the lines of the tax regimes prevalent in other diamond trading nations like Belgium and Israel. Such an approach would be tax-neutral and encourage companies in Belgium and Dubai, especially those run by NRIs, to shift their manufacturing to India, which is currently taking place in China.
“To realize the Make in India dream of the Prime Minister and ‘Make India’ an International Diamond Trading Hub, we seek implementation of Presumptive Taxation regime for the Indian diamond sector,” Pandya says. “By attracting International Manufacturing business to India (diamantaries from Belgium, Israel and Dubai), we can tap additional market share of approximately around USD 20 bn (in FY 2018-19) thereby helping the Government garner more tax collection in the long run. This will also help create jobs for 1.56 mn Indians (by 2018-19) in the gems & jewellery sector while preserving skill and talent of our labour force. This will help in tackling trade deficit and current account deficit through higher exports.”
The GJEPC chairman and delegation had earlier met Shri Jayant Sinha, Hon’ble Minister of State for Finance on Jan. 4, at his office to discuss the issue of the introduction of presumptive taxation for the diamond industry. Shri Sinha advised the industry to present more ideas to increase the tax collection of the industry and facilitate the objective of the Make in India Scheme. The chairman and other delegates of the council highlighted the presence of a presumptive taxation system in international diamond trading centers like Antwerp, Israel and how they have attracted margin share. GJEPC delegation pointed out that valuation of diamonds is a big issue; delegates also brought the issue of transfer pricing. The Minister stressed the fact of maintaining transparency in the total tax being paid by the diamantaires in the country. The Minister desired that the officials of GJEPC, the Department of Revenue, and concerned officials of Belgium and the Israel government hold a meeting to discuss the prevailing presumptive taxation system in Belgium and Israel, as well as their methodology of assessing and collecting tax so that the same atmosphere may be extended to Indian diamantaires by the government of India to make India at par with other international diamond trading centers.
Advertisement
The GJEPC chairman also urged the government to permit the sale of rough diamonds at the SNZ in Mumbai by implementing a 0.25 percent tax on sales turnover achieved at SNZ by foreign mining companies. This, he pointed out, would generate a new area of tax collection by shifting such sales from Belgium, Israel and Dubai.
The Finance Minister was also appraised of harassment faced by the industry in the form of different litigations related to: penalty for record keeping for transfer pricing; imposition of both custom duty and service tax on same goods; non-refund of service tax paid on way of exports. The trade pointed out the issue of harassment through different litigations on service tax non-refund and transfer pricing, wherein the assessment has taken place in a defined manner for more than 10 years. There has been a sudden demand for a new record system by appropriate authorities, in the absence of which substantial taxes are being levied on the exporters. Such arbitrary action deters overseas manufacturers to set up shop in India.
This breeds uncertainty on tax laws of the country, increased litigation and ultimately reduced ease in doing business in the country. This in turn allows competing countries for increased FDIs whereas we languish, the GJEPC delegation said.
The GJEPC chairman pointed out that uncertainty regarding tax laws in the country led to increased litigation and ultimately reduced ease of doing business here. As a result, FDI flows to other competing countries, he said. The chairman also urged the government to include the gems and jewelry segment under the Interest Subvention Scheme and Merchandise Exports from India Scheme (MEIS). He said that the gold jewelry sector had huge potential and suggested that jewelers should be involved under the government’s Gold Monetisation Scheme. He also said that the current 2 percent difference between import duty on gold dore bars and gold bars was too high and suggested it should be brought down to 0.25 percent.
