Imports of Industrial unsorted rough diamond into India, which had mostly stopped due to the introduction of a 3 per cent Goods and Services Tax (GST) in July, may resume after rate revision to 0.25 per cent.
The GST Council revised the 3 per cent tax on industrial and unsorted rough diamonds of HS code 7102.10 and 7102.21 to 0.25 per cent last week,
Since its rollout in July, the GST Act had levied two different rates on revenue from rough diamonds. Of these, non-industrial, or ‘gem quality’, rough diamonds attracted a rate of 0.25 per cent, while industrial and unsorted rough diamonds attracted 3 per cent GST.
These rough diamonds have been globally categorised into three codes wherein non-industrial rough diamonds carry the 7102.31 code, which attracted 0.25 per cent GST, while the rest were categorised under the 7102.10 and 7102.21 codes, which attracted three per cent GST.
Now that parity has been achieved in the tax rates for different HS codes of rough diamonds, imports of HS 7102.10 code unsorted rough diamonds is expected to resume from this month.
For the months of July and August 2017, imports of non-industrial rough diamonds of HS 7102.31 code and industrial unsorted rough diamonds of HS 7102.21 code saw imports worth Rs 14.55 crore and Rs 16.70 crore, respectively. However, the country registered zero imports of industrial unsorted rough diamonds of HS 7102.10 code, which was taxed higher at 3 per cent GST.
According to industry sources, the two separate rates had led to imported diamonds being blocked at customs subject to clearance. Earlier, there was no import duty on rough diamonds. When GST was introduced and industrial rough diamonds were placed at 3 per cent GST, several disputes arose with the customs. In most cases, the matters were pending at the customs end, and no imports were actually brought in.
However, the industry is still pressing the abolition of GST for business-to-business (B2B) transactions, as well as the removal of the five per cent GST on labour or jobwork.
Rough diamond imports stand at roughly Rs 1 lakh crore and the value of the same diamonds, when polished and exported, stands at Rs 1.48 lakh crore. The additional Rs 48,000 crore tends to be the foreign exchange earned by the government.
With over 95 per cent of the imported rough diamonds being exported, the government does not need to levy tax on labour for an industry that is labour intensive since it already earns revenue through foreign exchange, GJEPC (Gems & Jewellery Exports Promotion Council) has stated in its communication to the government.