India's Platinum Import Loophole Sparks Industry Controversy
Mon July 15 2024
India's platinum imports soared recently as bullion dealers exploited a regulatory loophole by registering alloys containing around 90% gold as platinum to benefit from lower import duties. This has led to competitive disadvantages for gold importers who pay higher duties and has resulted in New Delhi losing significant tax revenue.
India's platinum imports have surged dramatically in the past four weeks, surpassing the entire year's total as bullion dealers took advantage of a regulatory loophole by registering alloys with approximately 90% gold content as platinum, sources from the government and industry told Reuters.
Within this period, dealers cleared 13 metric tons of these metal consignments valued at around $1 billion from customs, a significant leap compared to the total platinum imports of 9.97 metric tons in 2023. A government official, who remained anonymous as he was not authorized to speak to the media, explained that a government rule classifies platinum alloys containing 2% or more platinum by weight as platinum.
Since April 1, the import duty on platinum is only 5%, compared to 15% on gold under the Comprehensive Economic Partnership Agreement with the UAE. Nitin Kedia, the national general secretary of the All India Jewellers and Goldsmith Federation, noted that this 10% duty advantage allows dealers to offer discounts of up to 2% on refined gold, disadvantaging those who import gold legitimately.
India, the second-largest gold consumer globally and among the top five in platinum consumption, is now facing significant revenue losses. Dealers are exploiting the lower duty rate to sell metal at discounted prices, affecting local market prices. Gold discounts in India have widened dramatically, reaching $34 an ounce over official prices on Monday, the highest in months.
A Mumbai-based bullion dealer with a private bank mentioned that the current platinum import rule was established when platinum prices were significantly higher than gold. However, with platinum now trading at a discount and lower under CEPA, a rule revision is necessary. In Dubai, traders are mixing small amounts of platinum and copper into gold bars and exporting them to India, misrepresenting them as value-added products.
Source: https://www.devdiscourse.com/