Custom Duties

Custom Duties on Export of Gemstones from India: A Facilitative Framework

India stands as a global powerhouse in the gems and jewellery sector, with Jaipur and Ahmedabad serving as vital hubs for the trade of precious and semi-precious gemstones. To maintain and boost this significant contribution to the nation’s economy, India’s export policy for gemstones is largely designed to be facilitative, aiming to encourage exports rather than impose heavy duties.

The General Principle: Duty-Free Exports

The fundamental principle governing the export of most goods from India, including gemstones, is that exports are generally duty-free. This means that when you export loose gemstones or finished gemstone jewellery from India, you typically do not pay customs duties on the export itself. This “zero-rated” status for exports is a cornerstone of India’s foreign trade policy, intended to make Indian products competitive in the international market.

Why are exports generally duty-free?

The Indian government’s strategy is to avoid taxing goods that are meant for consumption abroad. Imposing export duties would make Indian gemstones more expensive for international buyers, potentially reducing demand and hurting the industry. Instead, the focus is on:

• Promoting Foreign Exchange Earnings: Exports bring in valuable foreign currency, which is crucial for the nation’s economic health.
• Boosting Manufacturing and Employment: A thriving export sector translates to increased production, job creation, and economic growth within India.

• Enhancing Global Competitiveness: By eliminating export duties, Indian gemstone exporters can offer more attractive prices to international buyers.

Key Considerations and Related Regulations

While direct export duties on gemstones are generally nil, exporters must be aware of other critical aspects of India’s trade policy:

1. Goods and Services Tax (GST): Exports of goods and services from India are considered “zero-rated supplies” under GST. This means that:
   • Exporters can make exports without payment of Integrated Goods and Services Tax (IGST), typically by filing a Letter of Undertaking (LUT) or a bond.
   • Alternatively, exporters can pay IGST on exports and then claim a refund of the paid IGST and input tax credit (ITC) used in the exported goods. This ensures that the taxes paid on the inputs used in the manufacturing the gemstones or jewellery are not passed on to the international buyer.
     
     
2. Import Duties on Raw Materials: While finished products are exported duty-free, raw materials like rough gemstones, gold, or other precious metals often need to be imported. India has various schemes, such as the Duty-Free Import Program and Advance Authorisation, which allow gems and jewellery export companies to import necessary manufacturing inputs (including rough diamonds, colored gemstones, and precious metals) duty-free for their export-oriented activities. These schemes are crucial for maintaining the competitiveness of Indian manufacturing.
   
   
3. Documentation and Compliance: Exporters must adhere to stringent documentation and compliance requirements, which include:
   • Importer-Exporter Code (IEC): A mandatory requirement for engaging in import or export activities.
   • GSTIN and PAN: For Tax Compliance.
   • Shipping Bill / Bill of Export: The primary document for customs clearance of exports.
   • Certification and Standards: For certain gemstones and precious metals, adherence to international quality standards and ethical sourcing practices (like the Kimberley Process Certification Scheme for diamonds) is paramount.
   • Registration cum Membership Certificate (RCMC): Obtained from the Gem and Jewellery Export Promotion Council (GJEPC), the apex body facilitating the industry.
     
     
4. Value Addition Norms: For certain schemes that allow duty-free import of raw materials, there are often minimum value addition norms prescribed. This ensures that the imported raw materials are significantly processed and transformed in India before being exported, thus promoting domestic manufacturing and skill development.
   
   
5. Simplified Regulatory Framework for E-commerce Exports: The Indian government has been actively working on simplifying regulations to facilitate the export of jewellery and gemstones through e-commerce platforms, recognizing the growing importance of online sales channels.

In essence, India’s policy on custom duties for gemstone exports is a supportive one, designed to foster growth and competitiveness. By ensuring that exports are largely free from duties and providing mechanisms for duty-free import of inputs, the government empowers businesses like Carat Shoppe to thrive in the global market, offering high-quality Indian gemstones to customers worldwide.