India Bullion Industry Demands Tax Cut On Precious Metals.

NEW DELHI (Commodity Online): India's gems and jewellery industry has called for tax cuts on precious metals products like polished diamonds, cut diamonds, gold and silver jewellery. The Gem and Jewellery Export Promotion Council, India has demanded tax exemptions for jewellery exported from the country. The Council wants the government to implement this when the Finance Ministry presents the annual budget on February 28.

The Council in a memorandum to India's Finance Ministry said that Income Tax holiday for a period of 15 years in respect of 100% of the profits and gains accruing through exports of diamonds and other precious metals.

Following is the text of the memorandum that the Council submitted to the Ministry:

The Council would like to forward its pre-budget proposals for the year 2011-12. The current issue on Presumptive Taxation benign assessment procedure for assesses engaged in diamonds manufacturing/or trading activities declaring net profit rate @ 6%. The Council proposes introduction of Presumptive Taxation in Indian gem and jewellery sector instead of 'Benign Assessment Procedure' and reduction in net profit rate from 6% to 3%. The non-introduction of Presumptive Tax system for the gems and jewellery industry would further result in migration of business and capital to - low cost labour intensive countries like China and Thailand, emerging trading hubs and loss of employment for uneducated semi-skilled artisans, forced to return to their agrarian roots.

The current status on Exemption of Service Tax @ 10.2% in respect of the services of the brokers rendered outside India in the process of procurement of rough diamonds. Currently these are exported after being processed in India. The council proposes Exemption of Service Tax in respect of the services of the brokers rendered outside India in the process of procurement of rough diamonds which are exported after being processed in India. India's competitive edge in the global export market for cut and polished diamonds is on account of its skilled and cost competitive labour. The margins available in the global market are extremely thin. Levy of Service tax may be resulted in significant loss of employment and the livelihood of these workers (around 1.5 million workers) depends on the proper functioning of this industry.

Regarding Consignment Exports, there are issues like import of rough diamonds and coloured gemstones for assortment and re-export of the same, import of rough diamonds for purchase or return and establishment of a Diamond Sale Operation in India. The Council proposes to import rough diamonds and colour gemstones on consignment basis, import of rough diamonds for purchase and return and establishment of diamond sale operation in India. Allowance of import of rough diamonds for assortment and re-export of the same would help the country in generating additional foreign exchange by exporting the labour component of the final product. This would help the country in generating additional foreign exchange by exporting the labour component of the final product.

The Council proposes Income Tax holiday for a period of 15 years in respect of 100% of the profits and gains accruing to BDB. (Tax Holiday in line with SEZ Act, 2005), Duty Free Imports/Domestic procurements of capital goods, raw materials, intermediates, components, consumables, equipments, machinery, spares, parts, accessories, instruments and other goods which are importable, either without any restriction or subject to actual user condition and duty Free Procurement of Services for the Bharat Diamond Bourse.

By Introduction of Presumptive Taxation special provision to be made in respect of newly established Diamond International trading hub i.e. "Diamond Bourse(s)" in India. The burden of such additional costs is indirectly transferred to the units housed within the BDB. Presumptive Tax mechanism exists in Belgium Diamond Bourse and Israel Diamond Bourse. These facilities are for the members inside the Bourse. Therefore if India wants to compete with these countries, the Presumptive Tax mechanism should be introduced.

The Council has proposed Income Tax Exemption to all Export Promotion Councils. The Finance Act 2008 has amended the definition of Charitable purpose thereby the surplus generated in a particular year may be interpreted by the Income Tax Department as taxable and Circular No. 11 of the year 2008 on the above subject has left the interpretation to field level. In order that Export Promotion Council is not subjected to hardship of paying the income tax, their income should be exempt for Income Tax as before so that the surplus in one year may be utilized for the export promotion activities in next year. Otherwise they will not be able to retain surplus and be also subjected to TDS deduction and thereby leaving less resources for Export Promotion activities.

At present, Rhodium attracts an import duty of 2% and the Council has proposed import duty reduction on Rhodium from 2% to 0%. The import duty exemption on Rhodium would further augment the Indian jewellery industry in the global market and our sector would be able to diversify their jewellery product ranges, thus becoming more competitive at the international level.

Currently, machineries attract an import duty of 10% and the Council has proposed import duty reduction on machineries from 10% to 5% to meet the quality and design standards of the foreign buyers and to help the Indian gem and jewellery industry to excel worldwide.

Source : commodityonline.com