JAIPUR: Diamond and coloured gemstone industry will need Rs 5,000 crore more to meet the tax obligations as exporters are required to pay GST at every stage of movement of a product during the process of value addition, said Praveen Shankar Pandya, chairman of Gem & Jewellery Export Promotion Council (GJEPC), here on Sunday.
He said while exporters get refund of the taxes paid, the locked-up capital is adding extra financial burden on them at a time when the NPA-saddled banks are reluctant to provide financing. “In all countries like Belgium, European Union, Israel and Hong Kong where diamond trading and manufacturing are happening, passing of goods back and forth is common for value-addition and there is no tax on it. It is exempted. But under the GST, exporters in India have to pay tax at every stage of movement of the goods within a group. We have mapped that the diamond and gemstone industry has to invest Rs 5,000 crore to meet this additional tax obligation,” explained Pandya on the sidelines of the on-going ‘International Colored Gemstone Association Congress 2017.’
Of the imported diamonds, only 6% is sold in the domestic market and the rest are exported. Pandya said the government can tax the 6% of products when they are sold to local retailers but not the entire export industry.
“We are importing diamonds worth $16 billion and after value-addition, the industry exports them which fetches around $23 billion. In the process, the industry generates 1.2 million jobs. These issues can be sorted out for the benefit of the industry. The government is working on this but it is a little complicated for them and we are hopeful that they will find a solution,” added Pandya.
Before GST, demonetization had dealt a heavy blow to the coloured gemstone industry, which is concentrated in Jaipur. But Sean Gilbertson, executive director of Gemfields, the leading global miner of gemstones which meets about 45% of Jaipur’s demand, said the market has overcome that difficult period and the growth is expected to be in double-digits going forward.
After demonetization, Gemfields had to cancel an auction in December last year but held it in February. Gilbertson said its recent auction in October was a clear sign of improvement as the prices also saw an uptick compared to the February biddings.
However, Rajiv Jain, chairman ICA congress 2017, feels that the coloured gemstone industry is still not out of woods. He said a significant number of smaller units continue to find the environment stifling. “The big players always need the support of the smaller units, for whom the situation is yet to change. That’s why the growth could be flat to negative this year,” added Jain.
The biennial ICA Congress is witnessing participation of over 275 members from 25 countries, including 100 Indian jewellers.
Source- Times of India.