Editor’s Note
Ahead of the upcoming budget, India’s gem and jewellery sector is calling for duty reductions and tax reforms to boost its global standing, exports, and job creation.
The Gem & Jewellery Export Promotion Council (GJEPC) has urged the government to reduce duties and implement tax reforms before the budget to enhance the global competitiveness, exports, and employment of the gems and jewellery industry. Let’s explore the details.
The Gem & Jewellery Export Promotion Council (GJEPC) has submitted pre-budget recommendations to Finance Minister Nirmala Sitharaman. These proposals include key policy measures aimed at boosting India’s export competitiveness, ease of doing business, and supporting the industry’s resilience amidst global challenges. The industry has urged for targeted duty rationalization and procedural reforms to diversify exports and penetrate new markets, which would help Indian manufacturers remain cost-competitive. This industry plays a significant role in foreign exchange earnings and domestic employment generation. However, it currently faces several challenges. In FY 2024-25, India’s gems and jewellery industry achieved exports worth USD 28.7 billion.
GJEPC Chairman Kirit Bhansali said this. He further stated:
India, which cuts and polishes nearly 90% of the world’s rough diamonds, still struggles with the lack of a global trading hub comparable to Antwerp and Dubai. To address this, GJEPC has recommended implementing a liberal and predictable taxation regime for Foreign Mining Companies (FMCs) operating in Special Notified Zones (SNZs). The current 4% safe harbor tax is considered too high and discourages international trade.
Inspired by Belgium’s successful Carat Tax model, which attracted global diamond trade to Antwerp, GJEPC proposes a similar approach to establish India as a diamond trading and pricing hub. The council also seeks permission for renowned global brokers to operate in India, which would improve transparency, liquidity, and international participation in the domestic market.
GJEPC has urged the government to rationalize import duties on cut and polished diamonds and colored gemstones to help Indian exporters remain globally competitive. India faces challenges due to policy changes in mining countries, demand slowdown, and emerging competitive hubs in Africa and Southeast Asia. Under current rules, semi-processed diamonds imported from mining countries are classified as cut and polished diamonds and attract a 5% basic customs duty, making Indian exports less competitive.
Similarly, many raw gemstone-producing countries have imposed export bans or high duties, forcing Indian jewellers to import ready-to-use gemstones for production. The existing 5% import duty on these stones increases costs and weakens India’s position against competitors like Thailand and China. Therefore, GJEPC has recommended reducing the duty on cut and polished diamonds and gemstones to 2.5% and eliminating duty on raw gemstones to sustain production, employment, and export growth.
To stabilize exporters’ income amidst fluctuating metal prices, GJEPC has proposed replacing the current fixed-rate duty drawback system with a value-based (ad-valorem) system. The current fixed drawback system refunds only 75-80% of the duty paid, resulting in losses for exporters. With gold prices ranging from ₹99,000 to ₹1,25,000 per 10 grams, the fixed refund system becomes impractical. A value-based system would ensure proportional refunds, providing jewellery exporters with fair compensation and predictability.
The council has also called for including platinum jewellery and gold articles in the duty drawback scheme. Exports of platinum jewellery from India have increased nearly 17-fold over the past five years, primarily driven by Special Economic Zones (SEZs) that benefit from duty drawback.