India�s commerce and industry ministry has endorsed the exports-driven US$ 17-billion diamond industry�s demand for a shift from tax on income to a regime of turnover-based tax and proposed the same to the finance ministry, commerce secretary SN Menon. Turnover-based tax on gems, which addresses valuation issues better than income tax, is prevalent in many countries, including Belgium, the largest exporter of diamonds (US$ 23 billion).

�India could become a trading hub in diamonds, if the levy was on turnover. Globally, there is either a liberal tax regime (like in Dubai and China,) or a turnover tax or a presumptive tax on income on the gems and jewelry industry,� said Bakul Mehta, chairman, Gems and Jewellery Export Promotion Council. Turnover tax would increase compliance and the government and therefore, mop up more revenue. Gems and jewellery exports has been growing at a compounded rate of about 20% in the last one decade.

Another advantage of the proposed regime is it would encourage foreign direct investment in the domestic diamond industry. �The global gems industry is witnessing a shift from Belgium and Israel. India would benefit from this trend and attract substantial FDI,� said Mehta.