US tax: G&J trade hopeful of solution

The gems and jewellery industry finds the sixmonth suspension of retaliatory tax by the US as an indication for a multilateral solution.

Concluding one-year Section 301 investigations on Wednesday, the United States trade tepresentative (USTR) deferred by 180 days the proposal to impose punitive tariff of 25 per cent on select products imported from countries like India, Austria, UK, Turkey and Spain for imposing digital services tax on online platforms of foreign companies. The products include 17 jewellery items imported from India.

The suspension is intended to provide additional time to complete the ongoing multilateral negotiations on international taxation at the OECD and in the G20 process, the USTR, which coordinates US’ international trade, commodity, and direct investment policy, said in a statement.

At the USTR multi-jurisdictional hearing held virtually on May 10, the GJEPC along with other major trade bodies and leading exporters from the gems and jewellery sector put forward Indian industry’s grievances.

“Most of the speakers at the hearing were of the view that a multilateral solution would be a preferable option, as a unilateral action undermines and weakens the Dispute Settlement Mechanism under WTO. The suspension of tariff on goods for up to 180 days is an indication that the USTR is willing to wait till a multilateral solution is found for Digital Service Taxes (DST),” said Colin Shah, chairman, GJEPC.

The Indian gems and jewellery industry had argued that the imposition of the proposed 25 per cent import duty on 17 Indian jewellery items would immensely impact the labour-intensive sector with loss of jobs and livelihoods and a shift of business to countries such as China and Mexico.

The US is India’s major export market for gem and jewellery products. Exports of around $9.3 billion go to the market accounting for 25.6 per cent of the total gem and jewellery exports of $36 billion from the country.

American jewellery companies also bank on Indian companies to fund their business through long credit and memo facilities, which would have major repercussions.