On Friday, Director General of Foreign Trade issued a notification banning the duty-free import of Gold, Silver and articles made of these 2 metals. According to the notification, this facility was being exploited by a number of Indian importers since July and over 27 tonnes of gold was imported by a total of 25 gold importers.
An FTA (Free Trade Agreement) was signed with South Korea in 2009, according to which, the government allowed duty-free import of gold, silver and their articles. The latest notification by DGFT puts an official end to the agreement and duty-free import of precious metals.
According to an analyst, the facility has been open for years, however, last few months have seen a multiplied rise in the amount of gold being imported from South Korea. Before July, there were a few importers using this facility, however, in July, 10 tonnes of gold was imported and in the first 3 weeks of August, the gold imported through this rate has reached to 17 tonnes. The items which were imported include gold jewellery and coins.
According to the analyst quoted above, out of the 25 importers who used this facility in the last 2 months, 90% of the total gold was imported by top 5 importers and that has made the authorities suspicious about the violation of the free trade agreement.
According to analysts, the government has lost over INR 750 crores in revenue due to the gold imported under FTA.
After GST implementation from July 1st, such imports attract 12% tax and importers started to use this facility to overcome the tax liabilities. According to recent reports, the suspicion grew because the total capacity of South Korean refineries is 120 tonnes yearly and practically, it was not possible to import 17 tonnes of gold in India when the country processes just 10 tonnes of gold monthly.
The government now suspects that under this route, importers also got uncertified gold through other Asian markets.