VTB submits proposals to Russia’s Ministry of Finance to stimulate the circulation of polished diamonds in the country

Andrey Kostin, Chairman of the Board of VTB Bank considers it right to exempt from VAT not only the purchase and sale of diamonds by individuals, but also the sale of precious stones by diamond miners to banks and the public, the Vedomosti news daily reported in an article published yesterday.
“For banks, it is proposed to establish a zero VAT rate when selling diamonds made from Russian diamonds to individuals. In addition, it is necessary to allow the use of certificates for diamonds from independent laboratories from countries that are not “on the list of unfriendly countries”, such as China, India and Israel,” Andrey Kostin wrote in his letter to the Ministry of Finance.
According to Vedomosti, the document explains that now the legislation allows individuals to make transactions with diamonds in the retail jewelry segment, but the diamond investment market in the country is not developed. It is the presence of VAT in transactions for the sale and purchase of diamonds, as well as the certification of stones according to Russian standards, that hinder the development of the market. Another negative factor is the relatively small diamond-manufacturing capacity in the Russian Federation. Most of the diamond manufacturing capacities are concentrated abroad (about 85% of global diamond manufacturing operations are carried out in India), while, according to market stakeholders, Russian diamond manufacturers have the potential to expand production, the head of VTB said.
According to VTB estimates, these measures will create additional investment instruments for Russian citizens alternative to foreign currency and for Alrosa, the largest Russian diamond manufacturer an additional sales market amid the restrictions imposed by unfriendly countries that supported anti-Russian sanctions because of a special military operation in Ukraine.
Alrosa Deputy CEO Evgeny Agureev told Vedomosti through a representative that the liberalization of the diamond market will give Russians who are looking for tools to invest and save money in the face of currency restrictions and the volatility of financial instruments an alternative physical asset. The company considers VAT on diamonds "one of the key deterrents for potential investors." Agureev draws attention to the fact that within the Alrosa Diamond Exclusive program for private buyers interest in its investment part has grown several times over.