The Global Trade Research Initiative (GTRI) on Tuesday raised serious concerns over the surge in the import of precious metals from the UAE under a free trade agreement with India. GTRI demanded an investigation, citing the negative impact on the domestic jewellery industry and potential annual revenue loss for India, PTI reported.
The key issue centers around the India-UAE Comprehensive Economic Partnership Agreement (CEPA) that permits unlimited imports of gold, silver, platinum, and diamonds from the UAE into India with zero tariffs in the coming years.
GTRI's report highlighted that addressing these issues is crucial to ensure the integrity of import practices, safeguard domestic industries, and prevent significant revenue losses. The report noted that the zero-tariff policy under CEPA could cause an annual revenue loss of Rs 63,375 crore due to duty-free imports of gold and silver, based on FY2024 import levels. This policy is also likely to shift import business from banks to a few private traders and replace top suppliers with Dubai-based f ..
"CEPA tariff concessions are hurting India's jewellery industry, with gold jewellery imports from the UAE increasing due to lower tariffs," the report stated. It also pointed out that the zero tariffs on cut and polished diamonds under CEPA threaten India's domestic diamond industry, which currently benefits from zero duty on rough diamonds and a 5% duty on cut and polished diamonds.
GTRI emphasised the urgent need for a review of the agreement, noting that major imports are coming from Gift City, which has transparency issues. Currently, gold can be imported from Dubai at a 5% duty, but this will drop to zero in three years if the alloy contains 2% platinum. Similarly, silver imports from the UAE have surged due to an 8% duty under CEPA, compared to a 15% duty in general, resulting in significant tariff arbitrage.
An email query sent to the commerce ministry regarding the report did not elicit any response.
GTRI also claimed that many imports do not meet Rules of Origin conditions and hence do not qualify for concessions, raising the "strong possibility of money laundering." The report expressed concerns about the value addition process for silver imports, suggesting it is questionable and linked to money laundering
"This is the reason for the shift of silver imports from Indian ports to GIFT City exchange to benefit from concessional tariffs," the report stated.
GTRI Founder Ajay Srivastava suggested that there should be a CAG audit to investigate pre-arranged deals and invoice manipulation related to imports being routed through GIFT City. He elaborated that the trade pact contains provisions that allow unlimited imports of duty-free gold, silver, platinum, and diamonds into India over the next few ..
"CEPA allows unlimited import of gold from Dubai at 5% duty now and at zero tariff in the next three years if the imported metal contains just 2% platinum and 98% gold," Srivastava explained. Notably, platinum of value USD 1.2 billion was imported from Dubai in FY2023.
"The tariff concessions under CEPA will significantly hurt India's jewellery industry," he continued. "Under the India-UAE CEPA, India agreed to reduce tariffs on gold jewellery by one per cent each year, from 20 per cent to 15 per cent over five years, with a tariff rate quota (TRQ) or import limit of 2.5 tonnes."
Further concern was expressed about the impact on the Indian diamond industry due to the zero tariff on cut and polished diamonds under CEPA. Currently, India imports rough dia ..
"However, under CEPA, cut and polished diamonds can be imported at zero duty if they meet a 6% value addition in Dubai," the report noted.
On silver imports, the report argued that the surge is driven solely by tariff arbitrage. "Most imports do not meet Rules of Origin conditions and hence do not qualify for concessions. To supply silver granules to India, Dubai firms import silver bars from Russia and other countries, convert them into granules, and claim a 3.5% value addition in this process. Less than 0.5% value addition accrues in this process," Srivastava claimed.
He further elaborated on the problematic nature of the operation, explaining that silver bars command a higher price than silver granules of the same purity in the market. Silver bars are preferred for investment due to their standardized shapes and sizes, making them easier to trade, while granules are less common and may be trickier to find buyers for.
"Since December 2023, all silver imports from Dubai at concessional tariffs have been cleared through the customs at Gift City exchange. ..
Source Name : Economic Times