Only 2 tonnes of gold imported from UAE despite duty concession

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

Some of this has been put on hold by government officials to trick importers into gaming the system and importing gold disguised as platinum alloy. The India-UAE Free Trade Agreement, which came into force on May 1, allowed concessional duty on up to 120 tonnes of gold in the first year (80 tonnes till December). Officials attributed the sluggish response to the hike in import duty on gold under CEPA till June 30, 2022, which they say gold is coming in through informal channels.

The Center had raised the basic customs duty on gold to 12.5% ​​in July. With an Agriculture Infrastructure Development Cess of 2.5%, the effective gold customs duty is 15%. The basic customs duty on gold import from UAE is 11.5%. A government official said, “We are looking into it and the industry has told us that many people are not importing from the UAE because gold is available at a cheaper rate in the gray market.”

Import data from the UAE shows an increase in shipments of platinum in the April-November period. Government officials told Mint that this was due to the exploitation of a loophole, wherein a platinum alloy containing 96% gold was being imported into India to take advantage of the duty differential with respect to gold. Therefore, some bullion importers were reportedly importing refined gold in the form of platinum alloy, which attracted an import duty of 10.4% at the time, compared to 15% for gold. To plug the loophole, the import duty on platinum alloy was raised to 15.4% in October. “We have been told that there could be a rise in gold offtake from next month. This is partly because the issue of platinum alloy being disguised as gold is largely addressed by removing impurities,” the official said.

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

Nearly $1 billion worth of platinum was imported from the United Arab Emirates in September, a 34,000-fold increase from the same month a year earlier, Commerce Department data showed. In the same period, gold imports from Gulf countries declined by 82% to $135 million.

Platinum imports worth $139 million were imported from the United Arab Emirates in October, up 450 times from the same month a year earlier. Gold imports fell 76% to $160 million. However, inbound shipments of the precious metal dropped to just $1.13mn in November, following a duty hike on platinum alloys to curb imports. “We expect gold imports from the UAE to increase in the coming months as now the loopholes with regard to platinum alloy have been bridged to a large extent,” the official said.

An emailed query to the Commerce Department on Tuesday morning remained unanswered till press time.

dilasha.seth@livemint.com