Only 2 tonnes of gold imported from UAE despite duty concession

Only 2 tonnes of gold imported from UAE despite duty concession


NEW DELHI : India’s move to favour gold imports from the UAE by charging an import duty that is one percentage point less than imports from other countries is not bearing fruit: only about two tonnes of the yellow metal were imported under their free trade agreement in the seven months to December.

In fact, instead of growing, gold imports after the India-UAE Comprehensive Economic Partnership Agreement (CEPA) have reported a double-digit decline in the April-November period in value terms.

Some of this is put down by government officials to importers gaming the system and importing gold disguised as platinum alloy. The India-UAE free trade pact, which came into effect on 1 May, allowed for the concessional tariff on gold for up to 120 tonnes in the first year (80 tonnes till December). Officials attributed the tepid response under CEPA to a spike in gold import duty on 30 June 2022, which they say may be resulting in gold coming in from informal channels.

The Centre hiked the basic customs duty on gold to 12.5% in July. Along with the agriculture infrastructure development cess of 2.5%, the effective gold customs duty is 15%. The basic customs duty of gold import from the UAE is 11.5%. “We are looking into it and the industry has informed us that because of gold available at a cheaper rate in the grey market, many were not importing from the UAE,” said a government official.

Import data from the UAE shows a spike in shipments of platinum in the April-November period. Government officials told Mint that it was due to exploitation of a loophole, wherein a platinum alloy comprising 96% gold was being imported into India to leverage the duty differential with respect to gold. Hence, some bullion importers were reportedly importing refined gold disguised as platinum alloy which attracted 10.4% import duty at the time as compared to 15% for gold. To be sure, duty on platinum alloy imports was hiked to 15.4% in October to plug the loophole. “We are told that from the next month onwards there could be an increase in the offtake of gold. That’s partly because the issue of platinum alloy being disguised as gold is largely addressed by plugging the loophole,” the official said.

Around 25 tonnes of such imports were recorded during September and October 2022, according to an industry representation reviewed by Mint.

Commerce department data shows that in September nearly $1bn worth of platinum was imported from the UAE, a growth of over 34,000 times over the same month a year ago. In the same period, gold imports declined 82% from the gulf nation to $135mn.

In October $139 mn worth of platinum was imported from the UAE, a growth of more than 450 times over the same month a year ago. Gold imports fell by 76% to $160mn. However, after the duty hike on platinum alloys to deter imports, the inbound shipments of the precious metal moderated to just $1.13mn in November. “We expect gold imports from the UAE to go up in the coming months, now that the loophole with respect to platinum alloy has been largely addressed,” said the official.

Queries emailed to the department of commerce on Tuesday morning remained unanswered till press time.

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