Government permits banks to import gold from the UAE with reduced duties

Indian banks have received the green light to import gold from the UAE with reduced duty rates, a privilege granted under their bilateral Free Trade Agreement (FTA). This move signifies a substantial shift in the norms governing gold imports from the UAE, encompassing both qualified jewelers and banks authorized by the Reserve Bank of India.

According to insiders familiar with the matter, Indian importers can now benefit from a 1% duty advantage for bringing in up to 140 tonnes of gold from the UAE during the fiscal year 2023-24. The government’s recent notification regarding eligibility criteria outlines the specifics of this tariff rate quota, a move aimed at bolstering the domestic jewelry manufacturing sector.

Under the Comprehensive Economic Partnership Agreement, the UAE extended immediate zero-duty access for exporting gold jewelry to India, contingent upon a set tariff rate quota for gold imports. This quota was fixed at 110 tonnes for 2022-23 and escalated to 140 tonnes for 2023-24, with a gradual increase planned to reach 200 tonnes over five years. Consequently, Indian importers can procure UAE gold by paying a reduced duty rate of 14%, down from the prevailing 15%.

This development aligns with the Indian government’s emphasis on stimulating domestic jewelry production. Industry experts see this concessional duty import of gold as a significant benefit arising from the free trade agreement, enhancing India’s competitiveness in the sector.

Following the agreement’s enforcement on May 1, 2022, bilateral trade between India and the UAE surged to $84.84 billion in 2022-23. However, trade growth in the current financial year experienced a slowdown due to various factors, including a higher base effect and a notable decline in the rates of key commodities.

Despite a decline in India’s exports to the UAE by 0.78% and a significant 21.34% reduction in imports from April to October, the UAE remains a substantial source of gold for India, ranking second after Switzerland in terms of import value.