New Delhi: The government has permitted Indian banks to import gold from the United Arab Emirates at concessional duty within a specified annual quantity under the free trade agreement between the two countries, two people with direct knowledge of the matter said.
The government has significantly liberalised norms for gold imports from the UAE under the Comprehensive Economic Partnership Agreement to include both qualified jewellers and banks authorised by the Reserve Bank of India, they said, requesting anonymity.
“Indian importers can take 1% duty advantage to import up to 140 tonnes of gold from the UAE in 2023-24. A recent notification issued by the revenue department on Friday specified eligibility criteria to avail the tariff rate quota,” a government official said. Qualified jewellers were notified by the International Financial Services Centres Authority through the India International Bullion Exchange.
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Under the trade pact, the UAE offered India immediate zero duty market access for export of gold jewellery (the import duty was 5%) in exchange for tariff rate quota for gold, which was fixed at 110 tonnes in 2022-23 and 140 tonnes in 2023-24. It would be gradually raised to 200 tonnes over five years. Effectively, Indian importers can import UAE gold by paying 14% duty, instead of prevalent rate of 15%, said the second person, a trade expert.
The development was tune with the government’s focus to boost domestic jewellery manufacturing, said Ajay Sahai, director general of the Federation of Indian Export Organisations, a lobby group. “A 1% concessional duty import of gold made precious metal cheaper for value addition,” he said.
This is one of the major benefits of the free trade agreement, which helped India’s competitiveness in the sector, said Ashok Seth, regional chairman of the northern region at the Gem Jewellery Export Promotion Council, an industry body. India and the UAE signed the agreement on February 18, 2022, which came into force on May 1, 2022.
After the deal, bilateral goods trade in 2022-23 stood at $84.84 billion. India’s exports to the UAE saw about 13% year-on-year jump at $31.6 billion, while imports increased by about 19% to $53.23 billion, which included about $27 billion worth of petroleum and petroleum products.
The pace of trade growth in terms of value, however, slowed in the current financial year up to October for two main reasons, higher base effect and significant decline in rates of key commodities, Sahai said.
While India’s exports to the UAE fell by 0.78% at $18.08 billion in April-October, imports from the country contracted over 21.34% at $24.9 billion. The UAE is the second-biggest source of gold for India with $3.9 billion of imports in April-October, after Switzerland (about $12 billion in the same period), official data show.
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