The diamond-cutting and polishing industry of Gujarat has called for exempting the industry from the proposed value-added tax.

The Surat Diamond Association, the apex body of the diamond industry, has made representations to this effect to the Gujarat chief minister, Narendra Modi, and the Union commerce ministry.

According to SDA, more than 25 per cent of the five crore population of Gujarat is dependent on the diamond cutting and polishing industry.

As compared to other industries, the diamond industry is pollution-free, did not require water in huge quantity and even the power requirement is low.

"Implementation of VAT in the diamond-cutting and polishing industry will lead to unnecessary problems and this is the reason why we have urged the government to exclude us from it," SDA president Pravin Nanavati said.

"If the government can exempt 80 items from VAT, it can include diamonds as the 81st item," he said.

The SDA has stated that nearly 99 per cent of the total diamonds cut and polished in the country were exported every year. The yearly exports were valued at Rs 40,000 crore (Rs 400 billion). And, only one per cent of the cut and polished diamonds were used in India.

"It is the policy of the government not to levy any tax on exports. And to levy tax on just one per cent of the diamonds used in the country would not yield any substantial income for the country," Nanavati said.

According to Nanavati, the total Rs 400 crore (Rs 4 billion) worth of diamonds used in the country every year, the one per cent VAT would work out to Rs 4 crore per year.

"However, to collect this amount, the total expenditure to be incurred by the government and the industry would result in an outgo of Rs 35-40 crore (Rs 350-400 million) per year," he said.

Ninety per cent the diamonds cut and polished in the world were done in India and Surat claims a 40 per cent share of this.

According to the body, the diamond industry was in for a shock when the Gujarat chief minister said that the industry should not come to Gandhinagar with any exemption requests.