India may see revenue loss of Rs 63,000 crore every year as gold, silver imports from UAE surge
The New Indian Express | 16 July 2024
India may see revenue loss of Rs 63,000 crore every year as gold, silver imports from UAE surge
MUMBAI: Free trade agreement between India and the UAE will allow unlimited imports of gold, silver, platinum, and diamonds from the UAE into India with zero tariffs.
This would lead to annual losses of over Rs 63,000 crore annually, according to a report by the Global Trade Research Initiative (GTRI).
The report further says that the duty-free imports of gold and silver would move import business from banks to a few private traders, and replace top suppliers with Dubai-based firms.
“It will also disrupt the domestic diamond and jewellery industry, with major imports coming from Gift City, which has transparency issues,” says the report calling for an urgent review of the policy.
The India-UAE free trade provisions allow unlimited imports of gold, silver, platinum, and diamonds from the UAE into India with reduced or zero tariffs in the coming years.
At present, gold can be imported from Dubai at 5% duty, but will drop to zero in three years if the alloy contains 2% platinum. Silver imports from the UAE have surged due to an 8% duty under the pact, compared to a 15% tariff earlier, resulting in a significant tariff arbitrage.
India will reduce the duty on silver to zero over ten years, causing a revenue loss due to the shift of imports from other sources to the UAE, points out the report.
India’s total imports from the UAE decreased by 9.8% from $53.2 billion in FY2023 to $48.0 billion in FY2024. However, imports of gold and silver saw a significant increase of 210%, rising from $3.5 billion to $10.7 billion during the same period.
On the other hand, imports of all other products declined by 25%, dropping from $49.7 billion in FY2023 to $37.3 billion in FY2024.
GTRI had earlier pointed out that about 87% of India’s silver imports came from Dubai in May 2024. This shows that imports from other countries and Indian ports have almost stopped, with nearly all silver imports now coming through Dubai via the Gift City exchange.
Import of silver grains from Dubai happens at an 8% customs duty instead of the usual 15% through the Gift City exchange in Gandhinagar.
The importers pass a share of profit by offering 5-6% discounts in the local market. This is causing significant disruptions in India’s silver market stopping imports by all nominated agencies and reducing import duty and GST collections.
The standard import duty on silver in India is 15%. However, firms can import silver from the UAE at an 8% duty, provided they meet the conditions set by the India-UAE Comprehensive Economic Partnership Agreement (CEPA).
