Poll code barring deals above 50k without proper documents puts diamond ... - Economic Times

KOLKATA: An unlikely casualty of the Indian election season is the country's diamond trade. That's because the model code of conduct bars transactions in excess of Rs 50,000 without proper documents. Even the angadias, traditional couriers involved in the diamond and gold trade, are not too active.

But the timing of all this is decidedly bad, according to Vipul Shah, chairman, Gem and Jewellery Export Promotion Council (GJEPC). India's diamond traders are finding it hard to take advantage of falling rough diamond prices, which would normally translate into better margins. Gujarat, and particularly Surat, is a global hub for the cutting and polishing of roughs that are then sold in global

"In rural Gujarat, diamond business takes place only via cash. But now people have to show documents to I-T officials for any transaction worth more than Rs 50,000. That is creating problems for traders in local market as the documents they carry sometimes fail to satisfy officials," said Dinesh Navadia, president, Surat Diamond Association.

'Difficult to Satisfy Income-tax Officials'

"That is creating a lot of problems for traders in the local market as the documents they are carrying sometimes fail to satisfy the I-T officials," he said. "This has impacted the business in the local market and sales have fallen."

The code has had a dampening effect on the trade nationwide as well.

"People in the trade are being harassed by I-T officials. The rigorous procedure involved in the process is creating a lot of mental pressure on the trade. Inter-state movement of diamonds is also becoming difficult," said GJEPC chairman Shah. "Our factories are in Gujarat and we have to send rough diamonds to the factories for cutting and polishing."

On the other hand, the traders aren't quite sure whether they are erring too much on the side of caution.

"It is not yet clear to us whether diamond transactions also fall under the 50,000 bracket," Shah said.

GJEPC officials plan to meet KV Chaudhary, member of the Central Board of Direct Taxes or CBDT, to get a clearer picture.

"We will request him to keep diamonds out of the purview of the model code of conduct," said Pankaj Parekh, vice-chairman, GJEPC.

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