NEW DELHI(BullionStreet): As India gearing up for more plans to cut down gold imports, country's major gold sector body announced its expectations for the sector with the objective of increasing global exports, identifying new trade partners and promoting diamond jewellery in India.

With 28 days to go for the Union Budget, the Gem and Jewellery Export Promotion Council (GJEPC) has announced its expectations for the Indian Gem & Jewellery sector.

With the increasing import duties on gold and other raw materials such as cut and polished diamonds, the industry has also requested for eased tax norms, given the already slowed down economy.

The Council has strongly recommended the implementation of the Benign Assessment Tax Procedure and therefore reduction of the net profit to 2.5% of turnover instead of 6% for computation of income tax.

Commenting on the pre-budget recommendations, Vipul Shah, chairman, GJEPC, said: “Our aim has always been to stimulate greater foreign and domestic participation and also relieve the industry from the various challenges it currently faces.

The most significant reform on the agenda is the correct implementation of Benign Assessment Procedure and we are hopeful that the Ministry will pay heed to this long overdue policy change”.

He further added: “On a positive note, the import of rough diamonds has shown a healthy increase, resulting in high level of diamond jewellery manufacturing activity, higher jewellery exports and eventually a positive balance of payments for the country”.

“Reduction in the gold import rate and introduction of Presumptive Taxation are our key recommendations to the government”, said Pankaj Parekh, vice chairman, GJEPC. “With import duty on gold having increased by 600 percent in the last one year, this will drastically affect the lower and middle class end-consumers, who can no more afford to buy jewellery and hence will opt for either silver or gold-plated jewellery.

Moreover, this extreme escalation in import duty will also pose a challenge to the jewellery industry at large who will now have to be highly competitive to create very light-weight jewellery to retain their existing client base. Needless to say that this kind of spiraling duty will give rise to smuggling of gold bullion and hinder the growth prospects of the industry”.

Budget Expectations:

• While the industry would like a Presumptive Taxation regime in the long run, it would request the Finance Ministry to start by reducing the net profit to 2.5 percent of turnover instead of 6 percent for computation of income tax, as mandated under the Benign Assessment Proceduce (BAP).

• Allow for duty free import quota for cut and polished diamonds to the tune of 15 percent of the previous year’s exports. This is considering the levy of duty 2 percent on cut and polished diamonds in January 2012 resulting in lowered trading activity in India.

• Establishment of special Notified Zones for import and trading of rough diamonds

1. This is applicable to foreign diamond mining companies in such zones; whose net income is fixed and taxes are paid only on invoices raised to Indian companies.

2. This is with the objective of attracting international mining companies and trading players to sell rough diamonds in India.
   
   Indian gem and jewellery industry should be declared as zero-rated indirect tax regime.

All duties collected in way of Service Tax, VAT or GST should be refunded by way of duty drawbacks.

Establish a special fund by RBI to the tune of $3-5 billion for the refinance of borrowing given to export industries, which have a high import content of more than 70% of their exports.

Re-introduce a 2% interest subvention scheme on rupee export credit for G&J sector.