Govt to soon notify special zone for diamond mining companies

The central government is working on resolving the tax hurdles for global rough diamond ('roughs' in sector parlance) mining companies which sell in India at the proposed Special Notified Zone (SNZ) in this regard.

While the tax on import and export of roughs is nil in India, a cumbersome reporting process to the cusoms department has proved a major hurdle for global companies setting up auction offices here.

On the sidelines of the India International Jewellery Show here, Rita Teotia, Union commerce secretary, said: “We moved quickly following the announcement by Prime Minister Narendra Modi last year to set up an SNZ. The customs and Directorate General of Foreign Trade issued the necessary notification. But, some complex taxation issues remain, for which we will work with the industry, so that a reasonable outcome emerges and the SNZ can get operational at the earliest.”

Taxation has been a major deterrent for global miners to set up auction offices in India, in terms of re-export of unsold roughs. Despite India being the largest cutting and polishing hub in the world, processing 11 of every 13 roughs mined, global miners De Beers, Rio Tinto and Alrosa have been servicing their Indian clients from offices in Dubai, Singapore and Israel.

Teotia hinted a separate code for synthetic diamonds was also under consideration.

According to industry sources, existing laws permit global miners to bring roughs into India and pay one per cent of income tax on the value they sell. The valuation of the goods, however, might differ between the price miners sell to their Indian customers and what the customs assesses. Mining companies want a transparent policy. The industry has suggested a presumptive tax. his means an assessment by companies which would be acceptable to the customs, on the fair value.

Meanwhile, India’s first SNZ dedicated to the gems and jewellery sector is to be become operational in a week, at the Bharat Diamond Bourse (BDB) here. It will allow global miners to set up a trading office in India and service their clients through auctions here. “We will have our SNZ premise ready in the next five to seven days,” said Sabyasachi Ray, executive director, Gems & Jewellery Export Promotion Council.

De Beers has already indicated it was ready to set up an auction office in India’s SNZ once the taxation issues are resolved.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.