Industrial rough diamond imports to resume after tax revision

GST Council lowers the rate to 0.25% from 3%

Imports of industrial rough diamonds — stalled since July due to a 3 per cent goods and services tax (GST) — could resume in the wake of the GST Council revising the rate downwards to 0.25 per cent, say industry representatives.

Harmonising tax rates across different grades of rough diamonds, the Council revised on September 9 the tax on industrial and unsorted rough diamonds of HS codes 7102.10 and 7102.21 to 0.25 per cent. HS code stands for harmonised system code.

The GST Act had levied two different rates on revenue from rough diamonds: nonindustrial or ‘gem’ quality of rough diamonds (HS 7102.31) attracted a rate of 0.25 per cent, while industrial and unsorted rough diamonds were levied a 3 per cent tax.

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

“According to the GST rates announced for rough diamonds, the industrial and unsorted rough diamonds had been classified under the 3 per cent GST rate, while non-industrial rough diamonds were classified under the 0.25 per cent rate. However, the explanatory note for unsorted rough diamonds (HS 7102.10) supports that rough diamonds falling under other HS codes can also be treated as unsorted rough diamonds,” said Praveenshankar Pandya, chairman, GJEPC.

Taxing imports of various forms of rough diamonds under the GST would be susceptible to diverse treatment by the customs department, if the discrepancy was not corrected, he added.

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

In the months of July and August, while non-industrial rough diamonds saw imports worth ~14.55 crore and ~16.70 crore, respectively, industrial unsorted rough diamonds saw zero imports.

According to industry sources, the two separate rates had led to imported diamonds being blocked at the customs subject to clearance, thereby impacting business for at least a fortnight or so. But now, with all rough diamonds attracting the same rate, Navadia hopes stocks will start moving again rapidly and lead to lesser disputes with custom officials on coding of imported rough diamonds.