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India Trade Body Attacks Tax on Rough

Government sets levy on gold and jewelry at 3% under new system.
Jun 4, 2017 6:47 AM   By Rapaport News
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India’s Gem & Jewellery Export Promotion Council (GJEPC) has criticized the government’s decision to tax rough diamonds, claiming it will damage the nation’s manufacturing sector.

The government will introduce a 0.25% levy on the category as part of its new tax regime, known as the Goods and Services Tax (GST). The GST will replace the existing system, under which rough diamonds are exempt from taxes.

Finance minister Arun Jaitley (pictured) announced the new rates on Saturday, following months of uncertainty. Under the new program, the government will tax gold and gold jewelry at 3% — a lower rate than some members of the GST decision-making council had been arguing for. Gold is currently subject to a 1% excise duty, and individual states impose an additional value-added tax (VAT) of 1% or more.

Praveenshankar Pandya, chairman of the GJEPC, praised the decision to limit the rate on gold and jewelry, but described the tax on rough diamonds as a “retrograde step.”

“For a segment wherein 95% of the output is exported, and whose global footprint is under constant stress from other competitive economies, an upfront levy of GST on rough imports, which was hitherto exempted, would invariably cause a major setback to the trade and impact India’s significance in the global markets,” Pandya said Saturday.

With profit margins already thin, companies will be forced to reevaluate whether cutting and polishing is a viable business operation, he added, warning that the local industry might lose a “significant volume” of jobs and capital to other jurisdictions as a result.

“We request the government to reconsider its decision of taxing rough diamond imports under GST, owing to such severe repercussions,” he said.

The GST council reached a consensus on the gold tax following discussions in which members called for rates ranging from 2% to 5%, Jaitley said. He described the tax on rough diamonds as “nominal” and said it was for the purpose of keeping an audit trail.

Image: DD News/YouTube
Tags: Arun Jaitley, Excise duty, finance minister, Gem & Jewellery Export Promotion Council, GJEPC, gold, goods and services tax, GST, India, Jewelry, Manufacturing, Rapaport News, Rough Diamonds, rough imports, tax, value-added tax, VAT
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