The Union Budget Impact

Here is an update on the Union Budget (India) 2007, and its impact on the gem and jewelry sector.

(via) Times News Network writes:

The Union Budget may have brought some shine back for the gems and jewellery industry, but the announcements are not just enough to make it glitter.

The FM’s decision to reduce duty on cut and polished diamonds (CPD) from 5% to 3%, rough synthetic stones (from 12.5% to 5%) and unworked corals (from 30% to 10%) has evinced mixed reactions. While some players welcomed the move as a step in the right direction, others said it didn’t go far enough — zero duty on diamond imports would have helped attract global interest in India’s diamond trade.

The FM has also proposed the introduction of a benign assessment procedure for assesses engaged in diamond manufacturing and trading who declare profits from such activities at 8% or more of the turnover.

While instructions in this regard are to be issued shortly, industry sources are not sure whether the 8% implies gross or net profit. Net profit, they say, is around 3% and a clarification needs to be issued on this count.

“The budget has been neutral. We had anticipated relaxation in import of gold but that has not come through though there has been a reduction in import duty on cut and polished diamonds, rough synthetic stones and unworked corals,” said Rajesh Mehta, chairman of Bangalore-based Rajesh Exports.

Sources added turnover tax regime is followed by leading diamond-producing centres such as Belgium and Israel, and, if introduced in India, would preclude needless legal wrangling between tax assessors and assesses as to valuation of stock (diamond), a key problem that the industry faces today.

Bakul Mehta, convenor, diamond panel, Gem & Jewellery Export Promotion Council (GJEPC), says there are billions of stones produced and no standard input-output norms to determine the value of the stock. “Even within the same mine different quality of diamonds can be generated, quality differs from lot-to-lot and within the same lot,” he explained.

Stating that the duty cut on CPD and other raw materials was a positive step, GJEPC Chairman Sanjay Kothari said, “The industry had expected reduction on CPD from 5% to 0% which would have helped India emerge from the largest manufacturing centre to the largest trading centre at a rapid pace.”

GJEPC said the introduction of turnover tax regime was a historical step. The move is affirmative and encouraging. The industry still awaits the exact details of the taxation system and expects it to be in line with international practices. However, the industry expected the turnover tax to be applicable for the entire gems & jewellery sector.

Su-Raj Diamonds & Jewellery CMD Jatin Mehta said, “The FM is on the dot in recognizing the need to reduce duty. These steps are in the right direction and will enable the diamond industry, which is going through a rough patch, to compete with other international centers like Belgium and Israel.”

“As far as turnover tax is concerned it is still not clear how it would unfold and what impact it would have on industry. A duty cut of 2% may not serve the purpose of our exporters as many countries have a zero duty regime. Reduction of duty in synthetic stones will boost consumption at the lower end,” said Gitanjali Gems chairman Mehul Choksi.

More info @ http://economictimes.indiatimes.com/Gem_of_an_idea_but_the_sparks_still_missing/articleshow/1704435.cms