MUMBAI: As the gems and jewellery industry strives to achieve its export target of $20 billion in 2007-08, the industry players feel that the Union budget 2007-08, despite some positive announcements, could have done more.

The reduction in the import duty on cut and polished diamonds (CPD) from 5 to 3 per cent, rough synthetic diamonds from 12.5 to 5 per cent and un-worked coral from 30 to 10 per cent is viewed as a positive step. "The cut in import duty will definitely benefit domestic trade in diamonds." However, the industry has expected nil duty on CPD, which would have helped India emerge from the largest manufacturing centre to the largest trading centre at a much rapid pace,'' Mehul Choksi, Chairman, Gitanjali Jewels, told The Hindu. The duty on machinery import at 5 per cent would allow the industry to obtain the latest technology for enhanced quality production at competitive rates.

Bakul Mehta, former Chairman and Convenor, Diamond Panel, Gem and Jewellery Export Promotion Concil (GJEPC), also felt that the reduction of import duty on CPD was not enough. "If we want to make India a global diamond trading centre, it should have been zero. But if there are fears of any misuse, even a one per cent duty would have sufficed.''

The budget has proposed a `benign assessment procedure for companies engaged in diamond manufacturing and trading, which declare profits from such activities at 8 per cent or more of the turnover. "There will be more clarifications required regarding this turnover tax regime,'' Mr. Mehta said. "Across the sector, GJEPC studies have indicated that net profits are between 2 and 5 per cent of turnover. So anyone above 8 per cent profit should have been subject to the normal tax regime. We will anyway have to await details.''

"Introduction of the turnover tax regime in diamonds is a historical step towards enhancing diamond industry growth,'' according to a statement by Sanjay Kothari, GJEPC. "This principle acceptance of the tax system by the Finance Ministry is affirmative and encouraging. The industry still awaits the exact details of the taxation system and expects it to be in line with the International practices. However, the industry expected the turnover tax to be applicable for the entire gem and jewellery sector.''

GJEPC feels that the announcement still restricts the industry from going global with full vigour. The industry feels that much more can be done to develop and encourage foreign direct investment (FDI) in the sector.

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