A proposed new 5% value added tax (VAT) on loose rough and polished diamonds in the United Arab Emirates (UAE) due to start being imposed next January has created huge waves both in the UAE and in India which imports and exports from Dubai.
The emirate has become the world’s third-largest diamond trading center – jumping from $300 million about 15 years ago to $26 billion last year, according to Dubai Diamond Exchange Chairman Peter Meeus.
Indians importing rough diamonds would face a 5.25% tax payment on rough goods with the UAE’s planned 5% VAT rate plus given the 0.25% Goods and Services Tax (GST) introducing in India
Many diamond companies in India have established operations in Dubai in the last decade or so, attracted by the tax-free conditions.
Meeus said that everything that had been built up in Dubai over the past decade or so would be damaged.
In an industry suffering from extremely thin profit margins, the ramifications of the introduction of VAT for traders were very serious and would lead traders to re-think where they did business, he said.
Dubai Multi Commodities Centre (DMCC) Ahmed Bin Sulayem Chairman also criticized the move saying it went against the principles of a tax-free setting for diamond trading.