China is to impose new policies on diamond trade in an attempt to rectify the diamond market, and balance the tax burden

The new policy will take effect on July 1.

"Rough diamonds for sale on the Chinese market via Shanghai Diamond Exchange (SDE) will be exempted from value-added tax for imports; for polished diamonds sold on the Chinese market through SDE, tax refund will be arranged by the customs for the part of the actual tax exceeding 4 percent," the new policy stipulates.

At present, the value-added tax rate for diamond entering China through SDE is 17 percent. According to the new policy, the value-added tax for imports of rough diamond and polished diamond will fall to zero and 4 percent respectively.

"Rough diamond produced by domestic diamond enterprises to be traded via SDE will be exempted from value-added tax; polished diamond processed in China and traded via SDE will be exempted from value added tax for sale; polished diamonds processed in China, once enters SDE, will be deemed as export and no tax refund will be given to them. If such diamonds reenter China through SDE and the actual tax is higher than 4 percent, tax refund for the part higher than 4 percent will be granted upon collection."

In 2005, diamond imports and exports under general trade category and bonded trade totaled $410 million, generating the value added tax of $162 million. The increase is 11 percent and 23 percent over the previous year. The new policy will boost the healthy development of the diamond industry in China.

By People's Daily Online