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The Indian gems and jewellery industry was progressing in the past and will certainly progress in the future

04 february 2019

dinesh_navadiya_xx.pngDinesh Navadiya, the Regional Chairman (Gujarat Region) of The Gems & Jewellery Export Promotion Council (GJEPC) of India, is also the representative of the Gujarat G&J sector at various organisations as well as government authorities like the Customs, Government of Gujarat, etc.

Besides being the Executive Core Committee Member & Managing Committee Chief Patron Member at Southern Gujarat Chamber of Commerce & Industry, Surat, he has also served as the President of Surat Diamond Association for 7 years, representing industry matters to Government bodies for the welfare of MSMEs.

A passionate social worker, Navadiya initiated under the Surat Diamond Association, the building and running of a Hospital at Varachha Road, Surat for the artisans and other labourers who cannot afford good medical facility.

Here, in an Interview with Rough & Polished, Dinesh Navadiya draws a clear picture of the state of the cutting and polishing centres but expresses total faith in the revival of the resilient Indian industry, which has survived many a challenge in the past.

Some excerpts:

Can you give us a clear picture of the diamond cutting and polishing sector in Surat and other centres? Are they operating in full capacity now unlike pre-Diwali period?

The situation in the cutting and polishing sector is still the same and units are still not fully operational in Surat and in the other centres as per my understanding. Other than DTC Sightholders or few other medium-sized to large units, most of the smaller units may not be fully functional with an estimate of the decline in work in rural areas by 25% to 30% and in cities by 10% to 15%.

What is the rough supply situation now in the cutting centres, especially the SMEs units? Any improvement in their workings now, after attempts to supply small units directly from the traders?

The situation of rough supply is the same in the cutting centres right now. GJEPC is in the process to provide network platform to rough suppliers and SMEs of remote areas of Gujarat and it is expected that the first sample viewing and transaction will take place in the month of February.

According to you, what more steps can be taken to bring some solace to the SMEs, which are facing a shortage of roughs to keep their units running and protect their employees?

With the support of Government, a body can be set up to bring rough sellers and buyers on one platform periodically, like fortnightly or monthly. Also, steps should be taken by Government to provide financial support up to Rs. 2 crores via any formulated scheme or another source to the buyers of rough so that they can procure raw material. At present banks are not providing any financial support to this sector. The government needs to look into the same.

Financing by the banks is becoming more difficult for SMEs, despite efforts by the GJEPC. Do you think private lenders or even financial institutions are the next solaces?

As per the current situation, SMEs have to rely on private lenders and other financial institutions for financial needs because they are supporting the industry positively, but the interest rate is quite higher as compared to bank finance resulting to overall cost escalation to the product.

For the benefit of our readers, can you briefly explain the current problems of GST (Sales Tax) of 3% on diamonds? Was this not applicable before? Why is the issue started one year ago?

At present, the applicable GST rate is at 0.25% and not 3%. Earlier it was 3% but in January 2017 it was reduced to 0.25%. The problem is not the GST rate on diamonds, but the issue is the accumulation of ITC due to applicable GST on Job Work of Diamonds is 5% and other services including certifications, AMCs, Machinery Capital Cost, etc., is at 18%. Due to this inverted duty structure, GST is getting accumulated and ITC of crores of rupees is blocked. This money is entirely blocked and unused currently and there is no mechanism under the GST regime to get the refund of the GST paid on the input services. This has resulted in a shortage of working capital for the trade members.

According to some industry members, the government levying GST on diamonds from Surat office to Mumbai office is cumbersome and makes their business unprofitable. If GJEPC has taken this problem to the government, what is the outcome?

The industry has opted different model for their branch transfer between Surat - Mumbai. Further, on diamonds a 0.25% flat rate of GST is applicable. Hence, at present, we have not received any complaint or representation from our members regarding branch office transaction issues due to GST rates.  

Due to lab-grown diamonds becoming popular, it is expected to badly hit the demand as well as prices of small natural diamonds. What’s your say on this?

There is a separate group of people who understand the value and recognition associated with natural diamonds which cannot be replaced by anything. According to me, it will not affect the demand of the natural diamonds.

Wrapping up, what does the future hold for the natural diamond industry on the whole? With umpteen problems weighing down the industry, what do you foresee… going forward?

The industry has been progressing during the past decades despite challenges and will certainly progress in the same way in future as well. Currently, it is passing through some tough time but it’s still moving forward, and we are hopeful for the better future of this industry.

Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough & Polished