Budget 2023 takes a shine to lab-grown diamonds
The Budget proposes to reduce custom duty on the seeds used in the manufacture of lab-grown diamonds to lower their cost of production. It also plans to give a research grant to encourage indigenous production.
Finance Minister Nirmala Sitharaman has proposed to reduce the custom duty on the seeds used in the manufacture of lab-grown diamonds to lower their cost of production.
“India is a global leader in cutting and polishing natural diamonds, contributing about three-fourths of the global turnover by value,” the finance minister said.
“With the depletion in deposits of natural diamonds, the industry is moving towards lab-grown diamonds and it holds huge promise... To seize this opportunity, I propose to reduce basic customs duty on seeds used in their manufacture."
What the process involves
Lab-grown or cultured diamonds are produced in labs by replicating the high-pressure and high-temperature environment found below the earth's surface.
The process involves the use of diamond seeds—tiny slices of diamonds, as thick as human hair. Through heat and pressure in a plasma chamber, the carbon pieces are cultured to form a rough diamond, which is then cut and polished like a natural diamond.
Lab-grown diamonds are generally more affordable and are considered more environment-friendly. Optically and chemically, they have the same properties as natural diamonds minus the impact of mining.
Encouraging indigenous production
The government also proposes to give a research and development grant to one of the IITs for the next five years to encourage indigenous production of lab-grown diamond seeds and machines and reduce import dependency.
In the previous Budget, the customs duty on cut and polished diamonds was reduced to 5% from 7.5%.
Industry is thrilled
The players in the gems and jewellery industry are ecstatic about this first-of-its-kind move by the government.
Many industry players say the reduction of custom duty and the recognition of diamond seeds is a significant step towards boosting the lab-grown diamond industry in the country. In fact, they have been pushing the government for rollbacks on customs duty on raw materials for quite some time, which they believe could lead to lower production costs and a smoother supply chain, resulting in attractive pricing for the end-consumer.
Industry players feel the government has given the sector legitimacy and pushed for awareness on lab-grown diamonds.
“They’ve taken steps in the right direction, and this will overall be beneficial for the industry,” said Shivika Poonglia, Founder, Itara Jewelry.
Vidita Kochar, Founder of Jewelbox, said the move “will go a long way in educating consumers and building this category, which is still at a nascent stage in India.”
The Budget announcement, according to Surya Jain, Founder, Aupulent, which makes jewellery using lab-grown diamonds, paves the way for India to become a leader in cutting, polishing and finishing rough lab-grown diamonds as well as making studded jewellery.
“Effectively, the Modi 2.0 government is trying to reduce India's mined diamond import bill of $26 billion by promoting an ecosystem to produce lab-grown diamonds indigenously.”
Vaibhav Karnvat, Founder of House of Quadri, which uses lab-grown diamonds to make wedding jewellery, too believes the Budget proposal will boost India's capability—to not only cut and polish but also grow and supply rough diamonds to the rest of the world. "Lab-grown is the future and homegrown diamonds will foster employment," he added.
According to data from the Gem and Jewellery Export Promotion Council, the gross export of polished lab-grown diamonds from April 2022 to December 2022 was $1330.18 million (Rs 10,587.36 crore), up from $923.11 million (Rs 6,865.22 crore) in the year-ago period.
The import of rough lab-grown diamonds for the same period stood at $963.22 million (Rs 7,656.22 crore) against $865.94 million (Rs 6,435.04 crore) from a year ago. Polished lab-grown exports were $76.74 million (Rs 611.06 crore), against $29.03 million (Rs 215.82 crore) in the previous year.
In August last year, State Bank of India became the first lender to frame a policy to fund makers of lab-grown diamonds, which are usually sidelined by lenders due to the question of legitimacy.
The Budget announcements, coupled with such financing measures, will help the industry bloom.
While the industry is encouraged by the Budget proposals, it is also seeking revision of duty on machinery used to produce lab-grown diamonds, export incentives for lab-grown jewellery, and reduction of GST on cut and polished lab-grown diamonds.
Edited by Kanishk Singh