NEW DELHI: Think tank Global Trade Research Initiative (GTRI) on Friday suggested a withdrawal of duty concessions on platinum, silver, diamonds, gold jewellery, and tweaking the rules of origin norms in the India-UAE Comprehensive Economic Partnership Agreement (CEPA), which was implemented on May 1, 2022.
Alleging that there is a potential misuse of the rules of origin in the agreement, it asked for a review of the pact, revoke special privileges to the Gift City bullion exchange due to misuse and stop imports of sanctioned metals from Russia via Dubai.
The pact contains provisions for unlimited imports of duty-free gold, silver, platinum, and diamonds into India over the next few years which has led to a significant rise concessional tariff imports of gold, silver, and gold jewellery from Dubai.
In FY24, 119.35 tonnes of gold bars were imported valued at $7.62 billion. Silver imports from the UAE increased dramatically by 5853% to $1.74 billion in FY24 from $29.2 million in FY23. The import of gold jewellery from the UAE increased 290% to $1.35 billion from $347 million in FY23.
“The government was expected to annually lose Rs 63,375 crore in revenue in few years from such duty-free imports, based on FY24 import levels and pre budget tariffs,” said GTRI Founder Ajay Srivastava.
He added that the trades conducted at the Gift City exchange lack transparency, raising “serious” concerns about pre-arranged deals and invoice manipulation.
Ban the conversion of expensive products (Silver bars) to cheaper ones (Silver granules) to exploit CEPA benefits and adjust value addition rules to exclude profit marginsfrom the value addition calculations in the rules of origin, GTRI said.
To control large imports of gold and silver at reduced duties under the India-UAE CEPA, the government lowered import duties on gold and silver from 15% to 6% in the 2024 Budget.
“However, since this only offered partial relief, with tariffs on gold and silver from Dubai set to drop to zero in the coming years leading to rise in imports again, the government saw renegotiating the CEPA to revoke these tariff concessions as the only viable option,” Srivastava said.
The option of reducing MFN tariffs on gold, silver to zero was ruled out as it would lead to high imports and drain of forex.
The report said that the tariff concessions are negatively impacting India’s jewellery industry as under the CEPA, India agreed to reduce tariffs on gold jewellery by 1% each year, to 15% from 20% over five years, with a Tariff Rate Quota (TRQ) of 2.5 tonne.
