DGFT Amends FTP Para 4.49 to Formally Open Rough-Diamond Trading in Special Notified Zones

DGFT has updated the Foreign Trade Policy's core provision on Special Notified Zones (SNZs) for rough diamonds. A fresh notification rewrites Para 4.49 of FTP 2023 to state clearly that eligible foreign entities — diamond mining companies, their sightholders, and the brokers, aggregators and tender/auction houses connected to rough-diamond sales — may import, auction, sell and re-export rough diamonds within an SNZ under customs supervision. This is the policy-level foundation on which India's SNZ operations (now centred on Surat) run, and it ties eligibility to a new legal anchor.

What Happened

Through Notification No. 42/2026-27 dated 9 October 2026, issued under Sections 3 and 5 of the Foreign Trade (Development and Regulation) Act, 1992 read with paragraph 1.02 of FTP 2023, DGFT amended Para 4.49 of the Foreign Trade Policy. The revised paragraph expressly permits eligible foreign entities to import rough diamonds into an SNZ administered by the SNZ operator, under the supervision of Customs, and to auction, sell and re-export those diamonds on a consignment or outright basis.

Eligibility is defined by reference to Entry 13F of Schedule IV of the Income-tax Act, 2025, subject to the conditions applicable there. The amended text also assigns CBIC the task of prescribing, from time to time, the procedure for importing, auctioning, selling and re-exporting unsold rough diamonds. Notably, the revised provision drops the earlier cross-reference to RBI Notification 116 dated 1 April 2014, modernising the legal basis. The change takes effect immediately.

Why / Background

An SNZ is a customs-supervised enclave where foreign miners and their representatives can bring rough diamonds into India to show and sell to Indian buyers without a formal import for home consumption — unsold stones are re-exported. The model exists so that Surat and Mumbai, the heart of the world's diamond cutting and polishing industry, can access rough supply directly rather than through Antwerp or Dubai. The policy has been operating for years, but the enabling FTP language needed refreshing: to state the permitted activities cleanly, to update the eligibility anchor to the Income-tax Act, 2025, and to hand procedural detail to CBIC. This amendment does that, aligning the FTP framework with the operational relocation of the SNZ to the Surat Diamond Bourse that customs authorities have separately notified.

Who Benefits

Foreign diamond mining companies and their sightholders, and the brokers, aggregators and auction/tender houses that handle rough-diamond sales, gain a clear policy basis to operate in Indian SNZs. India's cutting-and-polishing industry — overwhelmingly concentrated in Gujarat — benefits from more direct access to rough supply. Indian gem and jewellery exporters downstream gain from a deeper, better-supplied rough market at home. Customs house agents and the SNZ operator handle the supervised movement and documentation.

Operational Detail

The amended Para 4.49 sets the policy permission; the operational mechanics — how stones are imported, shown, auctioned, sold and how unsold lots are re-exported — are governed by CBIC's procedures, which customs issues and updates. Activities remain under customs supervision throughout, and the goods are rough diamonds (HS 7102). Because the eligibility test now runs through Entry 13F of Schedule IV of the Income-tax Act, 2025, eligible foreign entities should confirm they meet those conditions, which also carry tax implications for the limited activities permitted in the zone. The dropping of the legacy RBI 2014 reference does not remove any live requirement that has been carried into current rules; entities should follow the current CBIC procedure.

What Foreign Entities, Importers and CHAs Should Do Now

• Confirm eligibility against Entry 13F of Schedule IV of the Income-tax Act, 2025 before planning SNZ activity.
• Follow the current CBIC-prescribed procedure for import, auction, sale and re-export of rough diamonds in the SNZ, and watch for updates.
• Coordinate with the SNZ operator and your CHA on customs-supervised movement, documentation and timelines for unsold-lot re-export.
• Gem and jewellery buyers: factor the SNZ channel into rough-sourcing plans now that the FTP permission is clearly stated.
• Keep records demonstrating the consignment/outright basis of each transaction and compliance with the authorisation and tax conditions.

The Bigger Picture

This amendment is the FTP-side complement to the customs-side relocation of the rough-diamond SNZ to the Surat Diamond Bourse. Together they signal a push to make Surat a genuine global rough-trading hub, cutting the industry's reliance on overseas trading centres. Re-anchoring eligibility to the Income-tax Act, 2025 and handing procedure to CBIC also tidies the legal architecture. For the gem and jewellery sector — one of India's largest export categories — a deeper domestic rough market is a structural positive.

Frequently Asked Questions

What does the amended Para 4.49 allow? Eligible foreign entities may import, auction, sell and re-export rough diamonds in a Special Notified Zone under customs supervision, on a consignment or outright basis.

Who is eligible? Foreign diamond mining companies, their sightholders, and connected brokers, aggregators and tender/auction entities — with eligibility defined by Entry 13F of Schedule IV of the Income-tax Act, 2025.

Who sets the operational procedure? CBIC prescribes the procedure for import, auction, sale and re-export of unsold rough diamonds, from time to time.

Is this the same as the Surat SNZ relocation? They are related but distinct. This is the DGFT/FTP policy permission; the relocation of SNZ operations to the Surat Diamond Bourse was notified separately by customs.

Conclusion

DGFT's amendment to FTP Para 4.49 gives rough-diamond SNZ trading a clean, modern policy basis: eligible foreign entities can import, auction, sell and re-export rough diamonds under customs supervision, with eligibility tied to the Income-tax Act, 2025 and procedure set by CBIC. Eligible players and the gem and jewellery trade should align their SNZ plans accordingly.

This article is a practical summary and not legal or tax advice. Verify eligibility, conditions and procedure against DGFT Notification No. 42/2026-27, the Income-tax Act, 2025 and current CBIC guidance before acting.