Dubai: India’s customs authorities are clamping down on gold importers using a loophole related to platinum to circumvent the 15 per cent duty on gold bullion. It was recently that India raised the duty on gold from 10 per cent to limit using up precious dollar reserves to source bullion from overseas suppliers.
But traders soon found a loophole in the process, which is what the authorities are stepping in to stop. This is how it works:
- Traders in India would place orders for the import of platinum alloys.
- “A section of India’s bullion importers were using this route to ship in refined gold cloaked as platinum alloy,” said an industry source. “The objective is to avoid paying 15 per cent duty on gold and pay only the import duty on platinum alloy of 10.75 per cent.”
According to Indian Customs’ notification, "Any alloy containing precious metal is to be treated as an alloy of a precious metal if any one precious metal constitutes as much as 2 per cent by weight of the alloy. Hence, an alloy containing 2 per cent or more, by weight, of platinum is to be treated as an alloy of platinum.”
The importers thus declare the goods as platinum rods which comprise 4 per cent platinum and 96 per cent gold, thus ending up paying the 10.75 per cent import duty.
Such shipments could lead to unfair pricing practices, say Indian jewellery industry sources. Plus, of course, there is the loss of import duties for the Indian government and ‘further add to the current account deficit’, sources add.
India is the world’s second biggest consumer of gold after China.
"The use of platinum alloys by a section of bullion importers is a cause of concern,” the source added. “Such trade malpractices threaten to derail the progress of the industry towards price and quality standardisation and ethical practices.
“The government needs to bring in necessary amendments to build stringent compliance and monitoring mechanisms to ensure adherence to the rules. In addition, it needs to reassess the high gold import duty structure to prevent such duty violations in future."