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The Indian Government has raised the customs duty on imports of alloys mixed with gold under the Comprehensive Economic Partnership Agreement (CEPA) signed with the United Arab Emirates (UAE) to plug the loophole exploited by bullion dealers.
In a Gazette notification issued late on Monday, it has raised the import duty on alloys with gold to 3.6 per cent from the earlier 0.5 per cent. The Agriculture Infrastructure and Development Cess has been fixed at 1.4 per cent.
The increase in the duty under CEPA with the UAE comes after platinum imports during the four weeks from mid-June exceeded the total imports of the precious metal in 2023.
Bullion traders said the hike in the duty on alloys is an indication that the duty under CEPA with UAE could be revised through a notification.
They said importers would not have any benefit in bringing gold as a platinum alloy any more as production costs would be higher now to make the alloys.
Deluge of imports
Reuters reported that during the period, bullion dealers shipped into the country 13 tonnes of gold alloy metals valued at $1 billion against a total of 9.97 tonnes imported during the entire 2023.
Under CEPA, duty on value-added products are lower. Traders in Dubai mixed platinum and copper in gold bars and claimed duty benefits under value-addition norms.
- Also read: Gold demand down 5% in Q2 on higher prices
The imports were made by bullion dealers exploiting a loophole in a rule classifying that an alloy containing 2 per cent or more of platinum by weight is to be treated as an alloy of platinum.
These alloy consignments contained about 90 per cent of gold and importers took advantage of this rule to avoid higher duties on gold. The Customs duty on platinum was 5 per cent from April 1 compared with 15 per cent on gold under CEPA.
Distorting market
Since importers paid lower duty on these “platinum alloys”, they offered discounts on sales of refined gold, affecting those who were importing gold under the legitimate route.
The imports led to revenue loss for the Government, while the domestic market witnessed price distortion.
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