India may soon stop concessional import of gold from Thailand under the bilateral free trade agreement till the country can prove that the gold originates from there and is not being sourced from a third country.
“The Commerce Department has written to the Department of Revenue asking it to issue a notification suspending import of gold jewellery from Thailand under the provisions of Early Harvest Scheme till the certificates of origin issued by Thailand are verified to our satisfaction,” an official statement issued by the Commerce Department on Wednesday said.
With rising gold imports consistently adding to the trade deficit and the current account deficit despite increase in import duties, the Government is closely examining all other factors that may be acting as fuel.
The Early Harvest Scheme signed by India and Thailand in 2004 allows import of gold jewellery at a concessional duty of one per cent against a regular duty of six per cent.
The Finance Ministry has long been suspecting that traders are bringing in cheaper gold from other South East Asian countries through Thailand to escape the steep import duties.
Revenue Secretary Sumit Bose had told reporters last month that the Finance Ministry had already taken up the issue with the Commerce and Industry Ministry.
Officials in the Commerce Department say that India had put in place very strong rules of origin in the Early Harvest Scheme signed with Thailand that allows import of 82 items including gold at concessional duties.
“In the rules we have ensured that Thailand should not be able to pass off goods from other countries as its own by making cosmetic changes. That is why we are sure that if there is any wrong-doing taking place, it will come to light as soon as we verify the certificates of origin,” a Commerce Department official told Business Line .
Despite a two per cent hike in gold import duties in January this year, gold imports during the month were almost 100 tonnes, the highest in 18 months, according to figures released by industry body Bombay Bullion Association.
The increase in purchase is mainly due to fears of a further duty hike in the Union Budget to be announced later this month, an industry source said.