India Exempts Gems, Jewelry From 10% Service Tax
June 08, 05
The Indian diamond and jewelry sector has received a boost with an announcement from the Finance Ministry that the production and processing of goods will be exempted from a proposed 10 percent service tax.
The exemption, which comes into effect on June 16, applies to the cutting and polishing of diamonds and gemstones, and manufacturing of plain and studded gold jewelry, and other precious metals.
The government made the taxation proposal in its budget for 2005-06, leading industry leaders, particularly the Gems and Jewellery Export Promotion Council, to hold intensive meetings with government officials in a bid to kill it off.
The proposed tax would have applied to each stage of the manufacturing process that is outsourced, leading to a sharp rise in costs.
More than one million Indians are employed in diamond polishing and jewelry production which is a major export earner for the country.
India's diamond and jewelry exports in the 2004-05 financial year zoomed by the country's official target of $13.3 billion as they soared close to 30 percent to $15.677 billion. Exports of cut and polished diamonds soared 29.6 percent to $11.181 billion from $8.627 billion in 2003-04, while the jewelry sector enjoyed an exceptional growth in exports of 42.2 percent.