India plans to review its trade deal with the United Arab Emirates (UAE) after a sharp increase in precious metals imports from the Middle Eastern country. The surge has raised concerns that traders could exploit tax loopholes.
Indian officials intend to meet their Emirati counterparts in September to review the two countries’ Comprehensive Economic Partnership Agreement (CEPA). They may discuss the effectiveness of rules to ensure the geographic origin of platinum, silver and gold imports for tax purposes.
Under the existing agreement, India has already reduced standard import duties on gold, while duties on silver and platinum, which are lower than those on bullion, are being gradually reduced.
Amid a fall in overall imports from the UAE, silver and platinum imports have risen sharply in the 2023-24 financial year. Incoming silver shipments in the first half of 2024 rose 42.4% to more than 2,200 tonnes compared with the same period in 2023, according to official data. Platinum imports jumped 995% to 1.7 tonnes.
The rise, coming from a country with no precious metal deposits, has raised suspicions that imports are not actually eligible for preferential treatment. Some traders, experts consider, may be evading higher duties on gold by registering imports as platinum, some people say.
Under the World Customs Organization’s classification, any metal alloy containing 2% or more of the cheaper metal is defined as platinum.
India’s new import duty regime, announced in July, has eliminated the financial benefits of the loophole: India cut import duties on gold and silver to 6% from 15% in an attempt to support domestic jewellery manufacturers. But the existing agreement with Dubai will eventually remove all import taxes on silver and platinum, prompting relabelling of shipments.
Concerns over the India-Dubai precious metals trade were first raised in June in a report by the New Delhi-based think tank Global Trade Research Initiative. The group said the current policy framework was facilitating flows and “worsening India’s trade deficit.”
Hélène Tarin, Editor-in-Chief of the Asian Bureau, Rough&Polished
