Gold Import Restrictions Implemented by Indian Government to Curb Non-Essential Items

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In an effort to reduce the inflow of non-essential items, the Indian government has introduced import restrictions on specific gold jewellery and articles. The Directorate General of Foreign Trade (DGFT) recently issued a notification stating that importers will now require permission or a license from the government to import certain gold items into the country.

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Read More About Restriction On Import of Gold

However, it’s important to note that these import restrictions will not be applicable to imports made in accordance with the Free Trade Agreement between India and the United Arab Emirates. The DGFT emphasized that imports under the India-UAE Comprehensive Economic Partnership Agreement (CEPA) tariff rate quota will be permitted without the need for an import license.

The decision to impose these new restrictions stems from the significant increase in imports from Indonesia under the India-ASEAN free trade agreement. Under this agreement, some gold articles were being imported duty-free from Indonesia and subsequently melted in India for jewellery production. According to Reuters, between April and May of the current fiscal year, India imported a total of $112.09 million worth of these products, with $76.28 million originating from Indonesia. It’s worth noting that gold imports usually attract a 15 percent duty.

The recent policy change aims to address the exploitation of a loophole in the system. Bullion dealers had started importing 3-4 tonnes of gold from Indonesia without paying any import taxes, even though Indonesia was not traditionally a major gold jewellery supplier to India. This practice prompted other dealers to take advantage of the loophole as well. The implementation of import restrictions effectively closes this loophole, bringing an end to such tax-free imports.

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Furthermore, the data reveals a decline in imports of pearls, precious stones, and semi-precious stones by 25.36 percent during the initial two months of the current fiscal year, amounting to approximately $4 billion. In addition, gold imports have decreased by approximately 40 percent during the same period, totaling $4.7 billion.

Overall, these new import restrictions align with the Indian government’s objective of curbing non-essential imports. During the months of April and May in the current fiscal year, total merchandise imports experienced a 10.24 percent decline, reaching a value of $107 billion.

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The move reflects the government’s determination to strike a balance between promoting domestic industries and managing the nation’s trade deficit. By targeting specific gold jewellery and articles, India aims to regulate imports and support the growth of its domestic manufacturing sector.

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