Live Markets »News & Advice»Economy News»Economy News Details
Economy News Details
Back

Stalled unsorted diamond imports to resume after GST rate revision to 0.25%

Vinay Umarji/Ahmedabad 13 Sep 17 | 04:59 AM

Industrial unsorted rough diamond imports, which had stopped due to a three per cent Goods and Services Tax (GST) since July this year, may resume after rate revision to 0.25 per cent, say industry representatives.

Harmonising tax rates across different grades of rough diamonds, the GST Council on September 9 had revised the three per cent tax on industrial and unsorted rough diamonds of HS code 7102.10 and 7102.21 to 0.25 per cent.

Related Stories

    No Related Stories Found
Widgets Magazine

Since its rollout in July, the GST Act had levied two different rates on revenue from rough diamonds. Of these, non-industrial, or 'gem quality', rough diamonds attracted a rate of 0.25 per cent, while industrial and unsorted rough diamonds attracted three per cent GST. These rough diamonds have been globally categorised into three codes wherein non-industrial rough diamonds carry the 7102.31 code, which attracted 0.25 per cent GST, while the rest were categorised under the 7102.10 and 7102.21 codes, which attracted three per cent GST.

The Gems & Jewellery Export Promotion Council (GJEPC) said this was a major relief but there was also a need for removing discrepancies in the treatment of rough diamonds of different HS codes, which could otherwise lead to disputes between importers and the customs department.

"As per the GST rates announced for rough diamonds, the industrial and unsorted rough diamonds had been classified under three per cent rate of GST, while non-industrial rough diamonds were classified under 0.25 per cent rate of GST. However, the explanatory note for unsorted rough diamonds (HS 7102.10) also supports that rough diamonds falling under other HS codes can also be treated as unsorted rough diamonds," said GJEPC Chairman Praveenshankar Pandya.

"If this discrepancy is not corrected, taxing imports of various forms of rough diamonds under GST would be susceptible to diverse treatment by the customs department," said Pandya.

However, with parity being brought in in the tax rates for different HS codes of rough diamonds, imports of HS 7102.10 code unsorted rough diamonds can resume from this month, said Dinesh Navadia, the regional chairman of GJEPC.

For the months of July and August 2017, imports of non-industrial rough diamonds of HS 7102.31 code and industrial unsorted rough diamonds of HS 7102.21 code saw imports worth Rs 14.55 crore and Rs 16.70 crore, respectively, while those for industrial unsorted rough diamonds of HS 7102.10 code, which was taxed higher at three per cent GST, had seen zero imports.

According to industry sources, the two separate rates had led to imported diamonds being blocked at customs subject to clearance, thereby impacting business for at least a fortnight or so.

"Earlier, there was no import duty on rough diamonds. Moreover, when rough diamonds are imported under a particular code, the same is scrutinised and at times undergoes a change in category by the customs officials. Since there was no duty levy earlier, this did not result in any disputes between customs and diamond importers. However, post-GST, this had led to import becoming more cumbersome and rising disputes," said Navadia.

Since July until now, rough diamond importers had seen an average delay of 15 days in the movement of stocks, which led to higher interest payment on working capital. However, with all rough diamonds now attracting the same rate of 0.25 per cent, Navadia hopes that stocks will start moving rapidly again and lead to lesser disputes with customs officials on the coding of imported rough diamonds.

However, the industry is still pressing for a couple of more demands from the government and the GST Council. Among these is abolishing GST for business-to-business (B2B) transactions as well as the removal of the five per cent GST on labour or jobwork.

Rough diamond imports stand at roughly Rs 1 lakh crore and the value of the same diamonds, when polished and exported, stands at Rs 1.48 lakh crore. The additional Rs 48,000 crore tends to be the foreign exchange earned by the government.

With over 95 per cent of the imported rough diamonds being exported, the government does not need to levy tax on labour for an industry that is labour intensive since it already earns revenue through foreign exchange, GJEPC has stated in its communication to the government.

Widgets Magazine

Sensex

Company Price Gain (%)
M & M1,482.653.56
Coal India271.053.02
Dr Reddy's Labs2,372.002.52
HDFC Bank1,873.051.95
Adani Ports401.951.75

Poll

Currently No Poll Available.

Online Portfolio

You can create Online Portfolio here using the below button.

Widgets Magazine