The Indian government has raised import duty on cut and polished diamonds and coloured gemstones from 2.5% to 5% in the Union Budget 2018-19, and the country's diamond trade is not pleased. Announcing the 2018 budget, and in an attempt to protect the local industry Finance Minister Arun Jaitley doubled the import duty on cut and polished diamonds, coloured gemstones and lab-grown diamonds and also raised customs duty on imitation jewelry from 15 to 20 percent.
The increase in customs duty could prove a major setback for diamond jewelry exporters in terms of cost of production and global competitiveness. Pramod Agarwal, chairman of the Gem & Jewellery Export Promotion Council said, "The move to increase import duty on cut and polished diamonds hampers India's chances of becoming an international diamond trading hub. This move doesn't provide India a level playing field vis-a-vis with other peers such as Belgium, Dubai and Israel." He explained, “The increase in customs duty would dent India’s exports, which have been stagnating over the past few years. Normally, overseas importers return 10 percent of imported goods because of many factors, on which we have to pay 5 percent duty now.” Praveen Shankar Pandya, Managing Director of Revashankar Gems and former chairman of the GJEPC, said, “India is the only country to levy import duty on cut and polished diamonds. Major diamond trading centres including Belgium, and Hong Kong have exempted import duty on the precious stones. Hence, this levy would hit India’s cut and polished diamond badly.”