With an aim to encourage investments and reduce litigations, gems and jewellery exporters today asked for a more simplified tax regime in the upcoming Budget.

The diamond industry appealed to Finance Minister Pranab Mukerjee to introduce presumptive tax regime under which the industry is charged on an average rate of 1-3 per cent of their profit margins.

However, as per the current procedure called Benign Assessment Procedure, the diamond manufacturer or trader making 8 per cent profit margin are not scrutinised by the Income Tax Department. This should also be extended to those earning lower profit margins, they said.

The Gems and Jewellery Export Promotion Council (GJEPC) is of the view that 80 per cent of the diamond industry is earning an average profit of 3 per cent due to tough competition from countries like Dubai which has a tax free regime.

"We are not seeking to reduce or avoid tax but we we want a secure presumptive tax system for the industry," GJEPC Chairman Rajiv Jain told reporters here.

The uncompetitive tax environment is driving direct investments away from India and mainly to China and Thailand which have cheap labour and lesser jurisdictions, Jain said, adding the Council urges immediate intervention of Minister of Commerce and Finance in this regard.

Besides, simplification of income tax procedures, the Council has sought reduction of import duty on rhodium from 2 per cent to zero per cent and levy on machineries from 10 per cent to 5 per cent.

Jain also sought withdrawal of one per cent excise duty on branded jewellery.

The gems and jewellery export industry employs 1.5 million people and out of 15 types of diamonds traded in the world, 14 get polished in the country.

In 2010-11, gems and jewellery exports were worth $43.14 billion.

Source: economictimes.indiatimes.com