GJEPC suggests carat tax model to make India diamond trading hub

Surat: Amid challenges for the gem and jewellery sector, the Gem & Jewellery Export Promotion Council (GJEPC) is focusing on making India a global diamond trading hub like Antwerp and Dubai, for which a carat tax model like Belgium has been suggested. In its representation to Union finance minister Nirmala Sitharaman ahead of the Union Budget, the council put forward various recommendations for growth of the sector.GJEPC recommended the introduction of a liberalized and predictable taxation regime for foreign mining companies operating in special notified zones in the country, while India cuts and polishes 90% of the world's rough diamonds. It said the current 4% safe harbour tax is considered too high and deters international trading. The council also sought permission for reputed global brokers to operate in India, improving transparency, liquidity and international participation in the domestic market.India's gem and jewellery exports, valued at $28.7 billion in 2024-25, continue to play a major role in driving foreign exchange earnings and employment generation. However, the industry faces many challenges, including geopolitical uncertainties, the impact of US tariff actions and slowing consumer demand in key markets. As the sector works to diversify exports and tap new markets, GJEPC urged the govt to consider targeted duty rationalization and procedural reforms that will help Indian manufacturers stay cost-competitive.GJEPC urged the govt to rationalize import duties on cut and polished diamonds and coloured gemstones to help Indian exporters remain competitive. India is facing challenges due to beneficiation policies of mining countries, demand slowdown and new rival centres emerging in Africa and South-East Asia. Under current rules, semi-processed diamonds imported from mining countries are classified as "cut and polished" and attract a 5% basic customs duty, making Indian exports less competitive.Similarly, many rough gemstone-producing countries restricted exports or imposed high duties, forcing Indian jewellers to import finished gemstones for manufacturing. The existing 5% import duty on these stones adds to costs and weakens India's position against competitors such as Thailand and China. GJEPC therefore recommended reducing the duty on cut and polished diamonds and gemstones to 2.5% and abolishing duties on rough gemstones to sustain manufacturing, employment and export growth.Among other proposals, to stabilize earnings for exporters amid fluctuating metal prices, GJEPC proposed replacing the existing fixed-rate duty drawback system with an ad valorem (value-based) mechanism. The council also called for the inclusion of platinum jewellery and gold articles under the duty drawback scheme.GJEPC recommended the introduction of a comprehensive tax refund scheme for foreign tourists. Currently, international visitors buying jewellery in India are liable to pay basic customs duty (BCD), agriculture infrastructure and development cess (AIDC) and goods and services tax (GST), but only the GST component is refundable. GJEPC recommended continuation of the existing duty exemption on imported LGD seeds beyond March 2026.