India has been the hub of diamond trading and processing for a long time now. With Surat being world’s leading diamond processing centre and Mumbai being the leading trading hub, India has put itself on the world map. Leading diamond manufacturer De Beers has its processing hub in Surat with state-of-art grading and polishing technologies.
The International Institute of Diamond Grading and Research (IIDGR) facility owned by De Beers is situated in Surat, which is known to cut and finish nearly 75% of the world’s polished diamonds. It grades diamonds according to the standards set by Forevermark. The facility can prepare 250,000 grading reports and make 350,000 Forevermark inscriptions according to Amitabha Das, director of operations at IIDGR. However, the low demand for diamonds in India has lowered their operations.
The recent Goods and Service Tax (GST) introduction by India is said to be the reason for lower demand. A 3% tax on polished diamonds and 18% on trading was announced under the GST compliance.
Govind Khopala, a diamond manufacturer from India, employing over 100 workers could process only 20% of capacity for polished diamonds over past three months.
He says, “This is going to be the worst-ever Diwali for the industry. Many small and medium units like us are in trouble. It was tough for me to clear the inventory of polished diamonds in last two months, offering heavy discount to the traders. We have to pay 3 per cent GST to the traders, which actually rob our profit margin.”
The small and medium diamond manufacturers are most affected by the GST. They don’t have cash flow or loans from banks to support the payment of tax, resulting in reduced manufacturing and declined exports. Since the diamond goes through four to five traders before the final export, a payment of 3% GST has to be made at every stage. This blocks a huge amount of their capital.
President of Surat Diamond Association, Babu Gujarati says, “No other competing diamond processing country has this type of system of levying of GST and refund after exports. In other competing countries such as Belgium or Israel, transactions taking place between a diamond dealer, manufacturer and exporter are controlled and monitored by allotting a special GST number. Any transaction taking place inside the circle with such GST number is exempted from payment of GST, whereas transactions outside this circle are taxed at normal GST rate. G&J [Gems & Jewelry] trade is not looking for any exemption but a system prevailing internationally for such transactions which are also export oriented.”
While the demand for diamonds in India is at an all-time low, the world’s luxury seekers are keeping diamond-makers in Surat busy to some extent and helping that it does not lose its shine entirely.