NEW DELHI: The move follows a sharp decline of about 18% in the export of gems and jewellery (April-October), which contributed 15% of the total exports.
The government is planning to ban the import of 24-carat gold jewellery, in a bid to reduce gold smuggling, duty evasion, misuse of free trade agreements (FTAs) with foreign countries.
The move follows a sharp decline of about 18% in the export of gems and jewellery (April-October), which contributed 15% of the total exports.
“We want to introduce stringent value-addition norms for the export of these products to ensure that the units are engaged in manufacturing and not earning arbitrage profits,” said Dr John Joseph, directorate general of export promotion, (a department under finance ministry).
The new proposal would allow only 18- and 22-carat gold so that it becomes difficult for importers to liquidate the stocks in local market and it will compel them to re-export the gold with value addition.
FTAs are meant to promote trade between two countries, wherein tariff and non-tariff concessions are extended on a reciprocal basis to the goods manufactured in the respective countries.
Currently, India has an FTA with the Association of Southeast Asian Nations (Asean).
According to official data, overall gold jewellery imports in the June quarter via FTA were worth Rs 3,145 crore against Rs 1,203 crore, the total imports in fiscal year 2015 ending March.
A steep rise in jewellery imports was noticed via Indonesia. In May, the import of gold jewellery increased to 6 tonnes against 400 kg in January this year.
Under FTA norms, the import duty on gold jewellery is 2% against 10% on raw gold and 15% on gold jewellery in the normal course. This means an 8% loss to the exchequer in terms of gold bars and 13% in the case of gold jewellery, which is approximately Rs 250 crore and Rs 400 crore, respectively, in just one quarter.
However, there is an additional condition of 35% value addition by an Asean member before a third-country product is exported to India. Value addition would be in the form of local manufacturing cost, designing etc. Besides this, the exporter should have the certificate of the origin country.
According to jewellers, it is easy to justify the value addition on gold jewellery. Rajiv Popley, director of Popley Jewellers, said: “The import of 24 carat jewellery can be easily used as raw material for production which competes with the norms of 10 % duty in the normal course. FTA is developed to encourage the manufacturing capacity of the respective countries. Hence, prohibiting 24-carat gold import might serve the purpose of such treaties.”
