The gems and jewellery industry wants provisions such as search and seizure and tax on gross assets in the Direct Taxes Code to be modified.It says these provisions could be detrimental to the sector’s growth which has been showing signs of recovery after reeling under recession. Industry representatives also appealed to the Government to incentivise units in SEZs and EOUs. “Certain schedules proposed in the Direct Taxes Codes like search and seizure provisions, tax on gross assets are highly penalising to the industry which is already reeling under the effects of global recession,” Mr Vasant Mehta, Chairman, Gems and Jewellery Export Promotion Council (GJEPC), said.
Observing that the proposed provision of search and seizure has the potential of abuse owing to the unique characteristics of stock-in-trade, he said it will also lead to loss of exports and defaults in commitments to deadlines. “Most of the stock is purchased on bank loans. We suggest these stocks be inventorised and not seized, as proposed by the Government,” he said. A delegation of gems and jewellery trade bodies has sent a representation on the issue to the Finance Minister, Mr Pranab Mukherjee, and has also approached the Commerce Ministry with its recommendations. On the issue of taxes, the gems and jewellery industry also suggested that no tax should be levied based on value of assets of the company. It also sought credit of tax paid on value of assets to be available for setting-off tax payable in subsequent years. Its other recommendations included continuation of the tax incentives in SEZ and EOUs and also providing objective parameters to enable rule based determinations of residential status of foreign companies.
GJEPC also said that the sector has been witnessing a slow revival with exports registering a two per cent increase in September for the first time in 11 months. Exports in September yielded $2.56 billion, according GJEPC data. The $27-billion gems and jewellery sector has been witnessing an upturn since March, and it expects exports to move up during Christmas. “Manufacturing is still down by 30 per cent but trading is on an upswing,” he said. Currently, UAE is the largest destination for gems and jewellery, accounting for 31 per cent of the total exports, followed by Hong Kong 25 per cent and the US 20 per cent.