Assume tank World Commerce Analysis Initiative (GTRI) on July 16 expressed critical issues over spurt in import of valuable metals from the UAE underneath a free commerce settlement and demanded an investigation as it’s impacting home jewelry trade and resulting in potential annual income loss.
The GTRI mentioned that by addressing these points, authorities can make sure the integrity of import practices, safeguard home industries, and stop important income losses.
Searching for an pressing evaluate of the settlement, it mentioned the India-UAE complete financial partnership settlement (CEPA) permits limitless imports of gold, silver, platinum, and diamonds from the UAE into India with zero tariffs within the coming years.
This may result in important “annual income losses, transfer import enterprise from banks to some non-public merchants, and substitute prime suppliers with Dubai-based companies,” it mentioned in its report.
“The zero-tariff coverage underneath CEPA is projected to trigger an annual income lack of ₹63,375 crore as a consequence of duty-free imports of gold and silver, based mostly on FY2024 import ranges,” it mentioned.
It’ll additionally disrupt the home diamond and jewelry trade, with main imports coming from Reward Metropolis, which has transparency points. An pressing evaluate is required, the report added.
It famous that at present, gold may be imported from Dubai at 5% obligation, however this can drop to zero in three years if the alloy comprises 2% platinum.
Equally, it mentioned, silver imports from the UAE have surged as a consequence of an 8% obligation underneath CEPA, in comparison with a 15% obligation typically, leading to a big tariff arbitrage.
“CEPA tariff concessions are hurting India’s jewelry trade, with gold jewelry imports from the UAE rising as a consequence of decrease tariffs,” it mentioned including zero tariffs on reduce and polished diamonds underneath CEPA threaten India’s home diamond trade, which at present advantages from zero obligation on tough diamonds and a 5% obligation on reduce and polished diamonds.
An e-mail question despatched to the commerce ministry on the report didn’t elicit any response.
GTRI additionally claimed that many imports don’t meet Guidelines of Origin situations, therefore don’t qualify for concessions, and elevating the “sturdy risk of cash laundering.”
“The worth addition course of for silver imports is questionable, with issues about cash laundering. That is the explanation for the shift of silver imports from Indian ports to GIFT Metropolis trade to learn from concessional tariffs,” it mentioned.
With regard to imports being routed via GIFT metropolis, GTRI Founder Ajay Srivastava prompt that there ought to a CAG audit to analyze pre-arranged offers and bill manipulation.
He defined that the commerce pact comprises provisions that enable limitless imports of duty-free gold, silver, platinum, and diamonds into India over the subsequent few years.
CEPA permits limitless import of gold from Dubai at 5% obligation now and at zero tariff in subsequent three years if the imported metallic comprises simply 2% platinum and 98% gold.
Platinum of worth $1.2 billion was imported from Dubai in FY2023.
“The tariff concessions underneath CEPA will considerably harm India’s jewelry trade. Underneath the India-UAE CEPA, India agreed to scale back tariffs on gold jewelry by one per cent every year, from 20% to fifteen% over 5 years, with a tariff fee quota (TRQ) or import restrict of two.5 tonne,” it mentioned.
Additional, it mentioned that the zero tariff on reduce and polished diamonds underneath CEPA will “considerably hurt” the Indian diamond trade.
Presently, India imports tough diamonds, that are then reduce and polished domestically earlier than being exported.
To advertise this native trade, India imposes zero obligation on tough diamonds and a 5% obligation on reduce and polished diamonds.
Nonetheless, underneath CEPA, reduce and polished diamonds may be imported at zero obligation in the event that they meet a 6% worth addition in Dubai.
On silver, it mentioned the import surge is pushed solely by the tariff arbitrage.
“Most imports don’t meet Guidelines of Origin situations and therefore don’t qualify for concessions. To produce silver granules to India, Dubai companies import silver bars from Russia and different nations, convert them into granules, and declare a 3.5% worth addition on this course of. Lower than 0.5% worth addition accrues on this course of,” Mr. Srivastava claimed.
He mentioned that entire operation is problematic as a result of silver bars command the next value than silver granules of the identical purity out there.
Silver bars are most well-liked for funding as a consequence of their standardized sizes and shapes, making them simpler to commerce, he mentioned including granules are much less frequent and could also be trickier to search out consumers for.
“Since December 2023, all silver imports from Dubai at concessional tariffs have been cleared via the customs at Reward Metropolis trade. The important thing concern is how imports cleared via Reward Metropolis meet the principles of origin necessities specified within the India-UAE settlement when importers from different port fail to satisfy these,” he added.
