Russian Finance Ministry’s roadmap for the diamond cutting industry

Theodor Lisovoy

The most important measures to support the industry include the abolition of VAT on the purchase of rough diamonds in the domestic market and reduction of administrative barriers for their import and export. Commenting on the abolition of VAT, Deputy Finance Minister Alexey Moiseev said in an interview with TASS on Friday: “We can say that this is a decision already taken.
While buying rough diamonds, manufacturers spend some time to study them for possible cutting options. All this time the stones are in work, therefore manufacturers have to pay VAT. That is, the working capital, which they have to finance and pay interest to the bank, is increased by 18%.

Therefore, the abolition of VAT on rough diamonds is even more important than its abolition on polished diamonds,” the deputy minister added, noting that it is important to discuss the issue regarding the relationship between ALROSA and diamond manufacturers.

We must submit a solution on VAT before the end of the year and other problems cannot even be considered until we solve the VAT problem,” Alexey Moiseev said.

According to him, the possibility of abolishing VAT on polished diamonds is also being considered, but the government will discuss this in conjunction with the abolition of VAT on gold. “I’d like to note that so far there is no final decision, as to how and whom we will exempt from taxes,” he stressed.

The abolition of VAT on polished diamonds will make them more competitive compared with those imported from other countries illegally, without paying taxes. It is very difficult to control this process,” Alexey Moiseev said, explaining that gold is an exchange traded commodity and its price is always known, but it is not so simple while dealing with gemstones, because there is no uniform standards system for them.

Another problem being tackled by the government is how to trace the natural origin of diamonds, according to the deputy minister. “Currently, there is no way for a buyer or even for a jeweler to understand the origin of the stone for 100%. Soon, such a possibility will appear, and the traceability of diamond origin will enhance the attractiveness of Russian diamond cutting,” Alexey Moiseev said.

Source Rough&Polished