Government Caps Surge in Gold Jewellery Imports
In response to an unusual spike, the Indian government has placed restrictions on imports of gold jewellery and parts, except from the UAE due to an existing trade pact. According to a notification by the foreign trade regulator, imports will now require an authorization.
Official data reveals the value of jewellery component imports jumped nearly 30-fold to $1.55 billion in the last financial year compared to just $52 million in the previous period. Meanwhile, first-time imports were also seen for jewellery set with precious stones such as diamonds.
Concerned investigative agencies had flagged the atypical growth in gold imports, particularly from least developed and trade agreement nations, likely due to duty loopholes. A senior commerce official explained they never saw this magnitude of imports previously for these categories. With December and January imports surging, several departments decided scrutiny was warranted to better track importers and supplying countries.
India's overall gold purchases have also risen sharply, taking the goods trade deficit in April to a 5-month high. Gold imports in that month more than tripled year-on-year to $3.11 billion.
Just before the recent budget, duties on gold components were increased considering evidence of abnormal growth in December and January reflecting duty arbitrage versus other gold items. Officials were additionally troubled by likely duty evasion in certain deals.
Notably, gold bars attract 15% import duty whereas such components saw only 11% previously. Some speculated certain importers exploited this disparity to bring in gold disguised as parts instead of bars.
Heightened domestic gold prices and existing tariffs on the metal are viewed as drivers for increased smuggling attempts. The move aims to bring transparency to gold trades and ensure compliance with taxation protocols.
