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GJEPC Meets With State Govt. to Address Pending Issues

Oct 13, 2014 3:20 AM   By Zainab Morbiwala
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RAPAPORT... The Gem & Jewellery Export Promotion Council (GJEPC) of India,  one of the most active industry associations globally, sent key council members, including its  chairman, Vipul Shah, Chandrakant Sanghavi, Ajesh Mehta, the co-convenor of the Diamond Panel Committee, Aagam Sanghavi and Sabyasachi Ray to meet with Saurabhbhai Patel, India's Minister of Finance for Gujarat to discuss trade issues.  

These industry representatives addressed many concerns. Shah discussed ways to  develop India as a trading hub for rough diamonds, and to mitigate  income tax assessment issues,  it was imperative that India promulgate a turnover taxation regime coupled with a consignment scheme  for rough diamonds as it the case in  Belgium and Israel.  The introduction of a presumptive tax system would go a long way to simplify   the existing tax computing mechanism and avoid litigation, resulting in collection of higher quantum of income tax.

Ray emphasized that introducing a turnover-based tax system would help to  attract foreign diamond mining companies and encourage them to trade  rough diamonds in India. Members requested introducing a turnover tax with net profit calculated for computing prevalent income tax at the rate of 2 percent of turnover for trading activity and 3 percent  for manufacturing activity.

Sanghavi recommended that consignment imports of rough diamonds in diamond bourses  be introduced. Though the Foreign Trade Policy allows this,  due to the absence of custom notification, free import and sales of rough diamonds on a consignment basis is not possible, which is why manufacturers in Gujarat have to travel to Dubai, Belgium or Israel and at a great operating cost. 

Members urged the Minister to  declare designated areas in the diamond bourses as special notified zones, where imports and trading of rough diamonds will be allowed and  mining companies may offer rough supplies directly to Indians.

Mehta raised his concerns with respect to the availability of  financing, as Export Credit Guarantee Corporation (ECGC) is unable to guarantee credit extended to the industry by the Public Sector Undertaking (PSU) banks. Based on such internal directives, PSU banks have started asking for extra collateral for additional lines of credit, which is highly detrimental for growth of exports.

Shah was quick to add that the industry is currently caught between banks' unwillingness to extend credit without ECGC guarantee and ECGC’s unwillingness to extend the limit of the existing guarantees, and he requested the central government intervene to break the deadlock.

Another issue discussed addressed summons against trade members for payment of import duty,  and service taxes, by the  Directorate of Revenue Intelligence (DRI) as well as Directorate General of Central Excise Intelligence (DGCEI), for the import of  diamond planning and mapping machines from Israel. According to Ajesh Mehta, the issue at stake is a tax on the software that has been downloaded for these machines. The Customs authorities have alleged that the price of the software  should be part of the assessed  value for computing import duty on machines. On the other hand, the central excise/service tax officers are of the view that the provision of software is an independent service and  service tax has to be paid on  downloading  software. 

Members also urged the state government to seek clarification from the central government in the larger interest of diamond manufacturers. The Minister assured  the trade he will take up issues with the central government, directly with Nirmala Sitaraman, the Minister of State for Commerce and Industry, Government of India.

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Tags: Times of India, Zainab Morbiwala
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