<div><em>Last Friday’s announcement by the Ministry of Finance exempting income arising out of the display of rough diamonds from the provisions of the IT Act of 1961 will pave the way for the Indian diamond industry to take a significant step towards its goal of becoming a trading centre as well, writes<strong> Stephen Rego</strong></em>.</div><div> </div><div>November promises to be a milestone month for the Indian diamond industry. It will mark the first time ever that rough diamonds which are being sold on tender will be displayed within the shores of the country to registered potential buyers. </div><div> </div><div>The commencement of direct dealings between mining companies and Indian diamantaires within the country itself will help correct one major anomaly in India’s dominant status in the global diamond industry – its inability to complement its position as the world’s largest manufacturing hub by developing as a hub for trading as well.<br> </div><div><table align="right" border="1" cellpadding="1" cellspacing="1" style="width: 200px"><tbody><tr><td><img alt="" src="http://bw-image.s3.amazonaws.com/Stephen-Rego200_0.jpg" style="width: 200px; height: 200px; margin: 1px;"></td></tr><tr><td><strong>Stephen Rego</strong></td></tr></tbody></table>Last year India purchased nearly US$16 billion worth of rough diamonds i.e. the bulk of rough supplies sold by miners from across the world. Yet, to procure this rough, Indian diamantaires would have to travel to Antwerp, Tel Aviv, Dubai or Hong Kong, or purchase through middlemen, a task that was challenging for small and medium enterprises as it added to their transaction costs. Squeezing of margins due to a global slowdown in demand over the last couple of years only added to their woes.</div><div> </div><div>The path for the historic first direct interaction between miners and Indian manufacturers was cleared with a seemingly routine circular issued by the government last week that announced that income from display of uncut diamond (without sorting or sale) within a Special Notified Zone (SNZ) “will not be taxable under the provisions of the Income-tax Act, 1961 with effect from April 1, 2015”.</div><div> </div><div>When the notification designating the SNZ was issued in May this year, leading mining companies from across the world had all expressed their interest in displaying rough diamonds for sale within the India Diamond Trading Centre (IDTC). However, they had sought certain clarifications from the government on matters related to taxation, procedures and other matters. The main issue – pertaining to IT payable on goods displayed in the country for subsequent sale at other locations – has now been resolved.</div><div> </div><div>During the coming month, displays of rough diamonds by different mining companies will commence. The viewing will take place in the IDTC, an area within the premises of the Bharat Diamond Bourse which had been designated as a Special Notified Zone (SNZ) by the government in May this year to allow and facilitate viewing/auction/sale of Rough Diamonds. The IDTC is a SPV set up jointly by The Gem & Jewellery Export Promotion Council (GJEPC) and the Bharat Diamond Bourse (BDB).</div><div> </div><div>The 4,000 square feet hall is divided into 10 viewing rooms and has state-of-the-art security and storage vaults. It also has facilities for receipt, storage, viewing, auctions/sales of imported Rough Diamonds as well as all necessary commercial, security & customs related facilities incidental to these activities.</div><div> </div><div>As of now there more than 20 companies included in the permitted list including De Beers, Rio Tinto, Alrosa, Gokhran, BHP Billiton, Endiama, Dominion Diamond Marketing, Namibia Trading Company etc.</div><div> </div><div>The concept of such a Zone had first been mooted by the industry a few years ago and been accepted in principle in the Report of the Task Group for Diamond Sector set up by the Ministry of Commerce in 2013.</div><div> </div><div>The idea received a huge boost last December when Prime Minister Narendra Modi announced approval for the setting up of an SNZ while speaking at the World Diamond Conference in Delhi which was jointly inaugurated by him and visiting Russian Premier Valdimir Putin.</div><div> </div><div>The operationalisation of the Zone will be a big boost to the Indian industry’s thrust of consolidating its position in the global diamond industry. India already accounts for over 90% of world polished diamond production by volume and over 70% by value. Indian dominance initially started in the 1970s and 80s due to the ability of its entrepreneurs and artisans to cost-effectively cut and polish tiny diamonds that were earlier considered too small for use in jewellery. However, the industry later moved up the value chain and today there are many companies that manufacture larger sized and fancy shaped diamonds at state-of-the-art facilities that are on par with the best in the world.</div><div> </div><div>The commencement of trading in rough diamonds will add another facet to the Indian diamond industry and will one day be seen as a new turning point in its further growth and evolution.</div><div> </div><div><em>Stephen Rego has been a journalist since the mid-1980s, and has spent close to two decades tracking the gem and jewellery industry while holding different editorial positions in industry specific publications and websites</em></div>
