Taxation Issues Hindering Purchase of Rough Diamonds in India

Finance and Trade
05/10/2017 14:49

According to The Economic Times, Indian diamond traders that participate in rough diamond auctions at Mumbai's Indian Diamond Trading Centre (IDTC) are complaining that taxation issues are reducing their activity to mere window shopping. "Diamantaires can see the rough diamonds they bid for at the IDTC, but the delivery doesn't happen locally .. despite their successful bids at Bharat Diamond Bourse", the newspaper writes. Indian traders, "say they are not getting the stones directly from miners like De Beers, Rio Tinto and Alrosa due to taxation issues, increasing their cost as they need to procure those now from overseas hubs," like Antwerp and Dubai.

Gem & Jewellery Export Promotion Council executive director Sabyasachi Ray told The Economic Times, "Even though the bidding is taking place at IDTC and diamantaires are seeing the rough diamonds, the allocation is being done from overseas diamond hubs because of taxation issues. If diamantaires could have bought rough diamonds on the spot, then transaction cost would have gone down at a time when exports slowed down." Consequently, traders want the government to reassess the issue so rough diamond buyers can reduce transaction cost. Miners, meanwhile, want the government to adopt turnover taxation like Belgium has done with its recently adopted Diamond Regime - locally known as the "Carat Tax" - under which taxes due are calculated as a lump sum representing a fixed percentage of turnover, rather than taxing profits, which are much harder to determine. "But," the newpaper writes, "Indian tax authorities want to enter into advance pricing arrangement and fix the tax rate. Miners don't agree to this as they fear that tax outgo may hurt them in those years when business is not good."