Alrosa, the Russian diamond mining group, has sought tax concessions from the government for establishing a sales outlet for diamantaires in Mumbai.
Group has been selling rough diamonds in small qunatity through exhibitions organised at the special notified zone (SNZ) in the Bharat Diamond Bourse. The bulk is sold through zero-tax centres in Dubai and a low-tax one in Belgium.
Government seeks turnover tax through advance pricing of rough diamonds, while Alrosa wants to equalise tax rates along the lines of Belgium, to increase supply to Indian processors. Alrosa contributes around eight per cent of India's total annual import of 153.31 million carats (worth $17.08 billion).
"Foreign diamond mining companies seek a business environment that is similar to Dubai and Belgium. Ultimately, the rough diamonds they offer to buyers in both the countries are routed to India, as most investors there are of Indian origin. We have requested the government to bring down taxation to the level of Belgium. The current environment allows the business to go to Dubai and Belgium," said Sabyasachi Roy, executive director, Gems and Jewellery Export Promotion Council (GJEPC), a body under the ministry of commerce.
Government took an initial step of signing a Memorandum of Co-operation (MoC) with Alrosa on Thursday. This is expected to lead to a congenial tax structure. India is the largest diamond cutting and polishing centre in the world; Alrosa is the largest producer by volume of roughs. Cooperation here would have a big impact on the global diamond industry.
"The MoC is the first step towards Alrosa setting up a rough diamond representative office. For long, GJEPC has been encouraging diamond mining companies to sell roughs directly to the Indian market; the MoC may well be the first step to this goal," said Praveen Shankar Pandya, chairman of GJEPC.
Chinese market
Meanwhile, China emerged as India's second largest destination for gems and jewellery export, after only America, during 2016-17. Pick-up slowed in the European Union and an import tax by the government of the United Arab Emirates also hit shipment. These are the other two large destinations for precious metal jewellery and stones.
India's gems and jewellery export to China jumped 28.5 per cent to nearly $2.5 billion during 2016-17. Jewellery routed through Hong Kong goes to China ultimately. In FY17, China and Hong Kong bought almost $13-billion worth precious metals and jewellery from India, thereby, posting a 17 per cent increase from the previous year's figures.
"China is the second largest economy in the world after the US. Hence, why not increase our gems and jewellery to that country? Aiming to boost our exports, we organised several bilateral trade opportunities, including buyer-seller meets, for Indian diamond jewellery manufacturers. So, the increase in jewellery sales to China was expected. We see a 100 per cent growth opportunity in a few more years," said Roy.