The Indian diamond industry suffers from a lack of credibility and a perception that its upper echelons are inhabited by unprincipled people, industry experts said during a panel discussion in Mumbai on Wednesday.

“There is lack of believability in our numbers. There is an inherent sense that in this industry, people are doing things that might not quite be right. They are not disclosing turnovers, they are doing some other funny business,” said Rohan Shah, managing partner at Economics Law Practice, a Mumbai-based law firm specialising in international trade law.

Shah was among a host of speakers on the second day of the annual International Diamond Conference, and was among a panel of experts at a session titled “Critical Challenges to Moving Ahead”.

Panel participants, who included representatives from major players in the Indian diamond industry, expressed concern that there was a preponderance of “round tripping” – the practice of manipulating a balance sheet that involved selling a commodity with the understanding that it would be bought back at the same price at a later date.

In India – the world’s leading centre for cutting and polishing diamonds – the practice can reduce or appear to reduce taxable income, the speakers said. “Round tripping is a major issue,” said Ashish Mehta, partner at the firm Kantilal Chhotalal, which sells diamonds and diamond jewellery in the international and domestic markets. “Last year we imported $10 billion worth of polished diamonds, compared with $6.5 in the first six months of this year.”

Mehta said there were some legitimate reasons for this, such as increased diamond consumption in India, “but some of that increase must be attributed to round tripping.” He added: “The trade is concerned about the extent of this.”

Industry leaders attributed the preponderance of round tripping to the presumptive tax rate – a tax rate based on a predetermined level of turnover, which the diamond industry argues is too high. “This was levied because the government does not believe in the veracity of industry balance sheets,” the experts said.

“The government doesn’t believe in the numbers,” said Biju Patnaik, a regional manager specialising in diamonds and jewellery at the Royal Bank of Scotland (RBS). “They believe that several others will come in asking for a presumptive tax rebate from the tax department.”

The panel’s moderator, Chaim Even-Zohar, chairman of the Tel Aviv-based Tacy Diamond Consultants, an industry consulting service, attributed the malfeasance to “only a very small group of players, who are playing it very big.”

RBS’ Patnaik stressed on self policing within the diamond industry, which he said was inherently vulnerable to negative perceptions. “Somehow, this is an industry that has a large perceptional cloud over it,” he said.