New Import Tax Aims To Lower Mumbai’s Octroi to 0.01%

(IDEX Online News) - The thorny issue of Octroi, or entry tax into Mumbai, which has had the diamond industry and the city’s municipal authorities at loggerheads for years, appears to have come to a resolution with the sides agreeing to implement a new system starting April 1.

At the start of the new fiscal year, the diamond industry will pay a 0.01% levy on all the rough and polished diamonds it imports through Mumbai by way of Octroi.

All goods that enter Mumbai for sale are slapped with a 2% entry tax. This has led to problems for the diamond industry, which is mainly headquartered in the city, while the vast majority of diamond manufacturing takes place in the neighboring state of Gujarat, particularly the city of Surat.

Rough diamonds imported through Mumbai are sent to Surat for processing, then shipped back for exports. Most of these diamonds are not sold in Mumbai but destined for overseas markets.

Until now, the Mumbai municipality insisted that 2% Octroi be levied on all diamonds entering Mumbai, regardless of their final destination. Those that were indeed exported, would then be eligible for a 1.8% refund after a 0.2% deduction of a service charge. The Mumbai municipality had also insisted, until now, that Octroi be levied on all rough diamond imports. This led to a large volume of imports being made directly into Surat, which does not have the entry tax.

However despite its insistence, the Mumbai municipality’s Octroi collection has not been spectacular. Diamond dealers say that paying on all the millions of stones that flow between Mumbai and Surat and then filing papers for a 1.8% refund on the ones that went to export markets, is simply not practical. And since diamonds are usually shipped by couriers and not as cargo, oversight has been a daunting task.

While agreeing to pay the 0.01% levy on all imports, the diamond industry has assured the municipality that it would practically double the revenue it currently generates from Octroi.