Why Rough Diamonds Enter India Duty-Free

Imagine a deliberate tax policy gap, rough, uncut diamonds entering India entirely duty-free, with just a concessional 0.25 percent integrated GST, while finished cut and polished diamonds face a 5 percent import duty and 3 percent IGST, a structural asymmetry that isn't accidental but a genuinely intentional policy tool, encouraging rough diamonds to be imported specifically for cutting and polishing within India, adding labour value domestically, rather than importing already-finished stones from foreign cutting centres.

This near-zero rough diamond duty explains directly why Surat's diamond cutting and polishing industry, covered throughout this page as employing over 800,000 workers, scaled to such enormous size in the first place, the tax structure essentially subsidises exactly the labour-intensive processing work India has genuine competitive advantage in, cheap, skilled cutting labour, while discouraging India from becoming merely a market for finished diamonds cut elsewhere.

This same logic explains the periodic policy debate covered implicitly throughout this page around whether to further reduce the cut-and-polished import duty, doing so would make foreign-cut diamonds more price-competitive in the Indian domestic jewellery market, but industry advocates, represented through GJEPC covered elsewhere on this site, have consistently pushed back precisely because narrowing this duty gap would undercut the exact protective incentive that built Surat's processing dominance in the first place.

This duty structure applies distinctly to lab-grown diamond seeds and rough material too, covered under the seed duty removal discussion elsewhere on this site, extending the same underlying policy philosophy, minimise tax friction on raw or intermediate inputs specifically to maximise the domestic value-addition and export competitiveness of India's processing industry, to the newer lab-grown segment as it has scaled, treating lab-grown diamond seeds with the same strategic logic that has shaped natural rough diamond import policy for decades.