Jewellery exporters have sought equalisation levy exemption from the finance ministry as new changes to the Income-Tax Act have impacted the procurement of rough diamonds through online auctions.
The procurement of rough diamonds from global miners and traders through the e-auction process attracts extra 2 per cent equalisation levy. This has led to global miners amending the contract terms. Some auction houses have barred Indian customers from participating in their June spot auction process, said Colin Shah, chairman, Gem & Jewellery Export Promotion Council.
The request features in the industry body’s representation to the finance ministry for Union Budget 2021-22.
In Budget 2020-21, the government had introduced 2 per cent equalisation levy on the sale of goods and services and products by foreign e-commerce operators. The provisions – aimed at bringing foreign e-commerce operators making sales in India under the tax ambit – have impacted the procurement of rough diamonds through digital platforms.
The procurement of diamonds online used to be a preferred choice right through the Covid-19 times. Now that’s been impacted because of the equalisation levy. Global miners do not need to get into taxation issues in India, added Shah.
In August, Finance Minister Nirmala Sitharaman had assured the industry that e-trade of rough diamonds would not attract the levy, but the government is yet to issue a clarification.
The industry has also asked the government to minimize the import duty on precious metals since a higher duty on gold has resulted in the commodity being imported from countries, such as South Korea and Malaysia, India has signed a free business agreement with.
This has led to an increase in price arbitrage in the domestic markets. A high import duty of 12.5 per cent will have to be brought down to 4 per cent, rendering unofficial channels importing precious metals, such as gold, unattractive, said Shah.
The industry body estimates that lowering the import duty to 4 per cent will help in freeing up working capital to the tune of ~600 crore on the import of gold bars for export purposes. India currently imports ~7,830-crore worth gold bars for exports.
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