China has eliminated its value-added tax (VAT) concessions on diamond imports, This change applies to all diamonds—both natural and lab-grown—traded through the Shanghai Diamond Exchange (SDE), China’s sole authorized platform for general-trade diamond imports and exports, meaning it affects the entire diamond trade sector.

Previously, importers benefited from a “levy-and-immediate-rebate” mechanism where they paid 13 per cent VAT but immediately received a 9 per cent refund, resulting in an effective tax burden of just 4 per cent. Under the new regime, importers and traders must pay the full 13 per cent VAT upfront at import, recovering it only after the diamonds are sold. This creates significant cash flow pressure and higher upfront costs for businesses in the diamond supply chain.

The policy change also extends to rough diamonds, which were previously zero-rated but now face the full 13 per cent VAT. This represents a dramatic shift in China’s treatment of raw diamond imports, eliminating what was effectively a tax-free entry point for rough stones destined for processing.

The immediate impact is twofold: consumers will face higher diamond prices as importers and retailers pass on increased costs, while domestic diamond producers gain a competitive advantage by no longer operating at a tax disadvantage compared to imported goods. This leveling of the playing field suggests a policy shift toward supporting domestic diamond manufacturing and trading capabilities.