NEW DELHI (TIP): The government is discussing a plan to set up a special zone with tax benefits for diamond import and trading in Mumbai, to try and develop the country’s financial capital as a rival to Antwerp and Dubai, which are currently trading hubs for the precious stone.

Commerce & industry minister Nirmala Sitharaman held preliminary discussions with commerce secretary Rajeev Kher and revenue secretary Shaktikanta Das last week and asked officials to work out a possible road map, sources familiar with the development said.

Gems & Jewelry Export Promotion Council’s (GJEPC) estimates suggest that in volume terms, 85% of the global cutting work takes place in India. At the same time, around 15% rough diamond is imported directly from the producing countries, while a majority is shipped in from the trading hubs.

“A trading hub in India will mean that the role of middlemen is limited and the concerns over invoicing, that we often hear from tax authorities, are reduced,” said Parag Parekh, vice-chairman of GJEPC, which is pushing the plan. Parekh said the Bharat Diamond Bourse in Mumbai’s Bandra Kurla Complex has been suggested as a possible option.

An official, however, said discussions on the likely location have not yet started and initially the government is looking at the package of measures that may be needed. The move to set up a special notified zone was first proposed by a task force headed by Anup K Pujari, the then director general of foreign trade, but the UPA failed to decide on it, prompting the BJP government to revisit it.

An official said the move may help check China‘s growing influence in the area as some Chinese companies had started acquiring shares in mines in Africa and are also pursuing direct deals with governments there for the supply of rough diamonds.

The task force had suggested several tax-related moves, including duty-free re-import quota for cut and polished diamonds up to a specified level and fixing the net income, while allowing payment of taxes only on invoices raised to Indian companies. Similarly, easier valuation norms at ports had also been recommended. The task force had also suggested a shift to a presumptive taxation regime in the long run, with easier rules introduced for the time being.