New Delhi: Imposition of 3% customs duty on import of cut and polished diamonds for domestic jewellers, which resulted in 7.83% decline in India’s exports of value added diamond articles in 2006-07 is likely to fall further to 12% in current fiscal until review for duty withdrawal is urgently effected, according to an analysis carried out on “Impact of 3% import duty levy on cut and rough diamonds” by industry chamber, Assocham.
According to the report, “India needs to spend 1% of its gems and jewellery export earnings on R&D to improve its value addition processes to retain its exporting supremacy in Asian and other markets of scale in Europe, America and elsewhere”.
* Fall in value added cut and polished diamonds could also be arrested, provided customs duty on their imports are withdrawn through a notification as projected for fiscal 2007-08 without any delay.
* Domestic jeweller’s processing units across the country effect value additions on metallic and non-metallic gems to the extent of Rs.19,000 crore per annum.
* 50% business out of this goes towards adding value in cut and partially polished diamonds for higher export earnings which have been hit on account of 3% export levy”.
* USA continues to be the largest export destination for Indian diamonds, gems and jewellery followed by UAE and Hong Kong.
If these markets get value added diamond, gems and jewellery articles from other countries,India’s exports will fall, especially when we have fixed export targets of $160 billion for 2007-08.
The major centres where value addition is effected on diamonds include jewellers that have their processing units in Jaipur, Mumbai, Surat, Chattisgarh and Kolar in Karnataka and these are the worst hit.
* Finance Ministry to reduce duty to zero%.
* 1% VAT on supply of gold for exports by nominated agencies such as STC and MMTC adds to their transaction costs and should be scrapped.
* Levy of octroi duty on purchase of gold/silver diamonds is effective in various states particularly that of Maharashtra which should also be rationalized to make exports competitive.
* R&D expenses should utilize and strengthen the domestic gems and jewellery sector, lest China erode India’s export market share which was roughly 57% a few years ago and has now come down to 49%. China’s current overseas market size for gems and jewellery is around 22%.