This paper proposes to use the spatial diversity of dual-antenna to counter the phase cancellation effect in an augmented radio frequency identification (RFID) system, which is developed for accurate indoor localization. In the augmented RFID system, a tag-like semi-passive RFID component (referred as sensatag) senses the backscattering communication between standard ISO 18000-6C compliant RFID reader and passive tags within its proximity. However, due to the superposition of reader's carrier wave (CW), the amplitude difference in the tag's backscattering signal is significantly attenuated at the sensatag's antenna. We refer to such effect as phase cancellation.To counter the destructive phase cancellation effect, two techniques are proposed based on dual-antenna diversity. In the first one called simple combination technique, simple addition of signals from two antennas is performed; in the second one called receiving path selection technique, signals from both antennas are converted into baseband and then conduct the selection in digital domain. Then we demonstrate the performance of these two techniques in a newly developed Proximity-detection-based augmented RFID system simulator (PASS) framework. The result shows that dual-antenna-based implementations are better than the simple antenna implementation in reducing phase cancellation effect. Moreover, receiving path selection technique reduces the probability of phase cancellation significantly with higher hardware complexity compared with simple combination technique.