India-UAE FTA: GTRI Urges Withdrawal of Duty Cuts on Gold, Silver, Diamonds

India Urged to Withdraw Duty-Free Concessions on Precious Metals in UAE FTA Review

New Delhi, Aug 16: GTRI has called for changes in rules and withdrawal of duty-free concessions on platinum, silver, diamonds and gold jewelery as the government seeks to review certain provisions of the free trade agreement with the UAE. Standards of origin in the Treaty.

India and the United Arab Emirates (UAE) signed a free trade agreement (FTA) called the Comprehensive Economic Partnership Agreement (CEPA) on February 18, 2022, and entered into force on May 1, 2022.

The Global Trade Research Initiative (GTRI) had earlier stated that the agreement contained provisions for unlimited import of duty-free gold, silver, platinum and diamonds into India over the next few years, which would harm the domestic industry.

The court alleged that there was potential abuse of rules of origin in the agreement and therefore India should review CEPA. These rules have to be followed to get duty concessions under the agreement.

The review said India should focus on issues such as withdrawing tariff cuts on platinum, silver, diamonds and gold jewellery, adjusting and banning devaluation rules to exclude dividends from devaluation calculations in devaluation rules. Converting expensive products (silver bars) to cheaper ones (silver granules) to exploit CEPA benefits,” GTRI said.

The government has been asked to stop the import of metals from Russia through Dubai and cancel special privileges for the Gift City Bullion Exchange due to abuses.

The main objective of the review is to reduce bulk bullion imports and tighten rules of origin to prevent misuse of bullion imports from Dubai.

119.35 tonnes of gold bullion worth $7.62 billion was imported in FY24. Silver imports from the UAE increased by 5853 percent from $29.2 million in FY2023 to $1.74 billion in FY24. Gold jewelery from the UAE is expected to grow 290 per cent to $1.35 billion in FY24 from $347 million in 2022-23.

To curb large imports of gold and silver at lower duty under India-UAE CEPA, the government has reduced import duty on gold and silver from 15 percent to 6 percent in Budget 2024.

However, as this provides partial relief, gold and silver tariffs from Dubai will fall to zero in the coming years, leading to a rebound in imports.

Explaining its proposals, GTRI founder Ajay Sahai said India has agreed to a zero tariff on unlimited quantities of platinum from Dubai, which will come down from 5 percent today to zero by 2026, which is a major concern for India because, according to WCO (World Customs Organization) classification rules, Any metal with just 2 percent platinum can be classified as platinum.

“Some firms have taken advantage of this and imported platinum containing 98 per cent gold. This loophole will allow unlimited import of gold from Dubai at zero duty, which will result in significant loss of customs revenue and depleting foreign exchange reserves,” he said. Said.

On silver, it said India has agreed to zero duty on silver within 10 years from 2022 and the current concessional tariff on imports from Dubai is 8 percent.

“As tariffs will come down to zero in the next few years, imports will rise again if CEPA is not renegotiated,” Srivastava said.

According to the report, tariff concessions are adversely affecting India’s jewelery industry.Under CEPA, India has agreed to reduce the tariff on gold jewelery by 1 per cent every year, from 20 per cent to 15 per cent in five years, with a tariff rate quota (TRQ) of 2.5 tonnes.

Currently, the tariff or customs duty is 17 percent with a TRQ of 2.3 tonnes, and the low tariffs make imports from the UAE much cheaper than domestic products, making it difficult for local producers to compete.

It alleged that most imports do not comply with rules of origin conditions and are therefore not eligible for exemptions.

“To supply silver bullion to India, Dubai firms import silver bars from Russia and other countries, convert them into bullion and claim 3.5 per cent value addition in the process. Less than 0.5 per cent value addition is realized in the process. The rest of the value addition can be shown as legitimate profit and money laundering,” he said. Said.

He added that transactions made on the Gift City exchange lacked transparency and raised “serious” concerns about pre-arranged deals and invoice manipulation.