Hazy tax issues to dull diamond dollar accounts

diamond dollar accounts, which enables dollar transactions within the country, will fail to take off unless the government clarifies the tax implications. till now dollar transactions were allowed for purchase of rough diamonds by exporters. the exim policy has also extended the use of the diamond dollar account for transaction in cut and polished diamond. while such a move should apparently activate such accounts, bankers said the use will not pick up unless the income and sales tax issues are cleared. the policy has allowed non-ddas (diamond dollar account scheme) holders to supply cut and polished diamonds to ddas holders, which would be counted towards discharge of his export obligation or entitle for a replenishment licence as the case may be. however, sources said this may call for the buyer giving a disclaimer certificate to transfer the benefit to the supplier, who had imported diamond and has an export obligation. “it’s not clear the tax the seller has to pay for the proceeds,� said a banker. the state government should also make it clear that such transactions between two traders would be treated as a local sale. diamond dollar accounts, it may be mentioned, is a unique facility for operating hard currency accounts to overcome exchange risk and sustain in a market which thrives on very little lead time. exporters with turnover of over rs 5 crore was entitled to such a facility.india was one of the few countries where the government did not allow local traders to settle their deals in dollars. this was cleared in 2000 by the reserve bank of india to give diamond exporters a better footing.the banks running in diamond dollar accounts are abn amro, state bank of india and canara bank which is the banker to hindustan diamond co, supplying rough diamond. nine out of 10 diamonds set in jewellry made all over the world are cut and polished in india.