Surge in gold jewellery from Indonesia alarms India

Revenue department steps up vigil in Hyderabad, Chennai, and Kolkata

A sharp rise in gold jewellery imports from Indonesia in the quarter ended June has authorities worried. Measures are being considered.

While imports from Indonesia, a member of the Association of Southeast Asian Nations (Asean), accounted for about half the overall unstudded gold jewellery imports in 2014-15, the June quarter of this financial year saw 92 per cent of those imports from Indonesia.

Gold jewellery imports from Indonesia rose from Rs 620 crore in 2014-15 to Rs 2,896 crore in the June quarter of this year. Some have put this to the wide duty advantage offered under the India-Asean free trade agreement (FTA) signed in 2006. Overall gold jewellery imports in the quarter ended June were Rs 3,145 crore, about three times the imports in the entire FY15 (Rs 1,203 crore).

The revenue department has stepped up vigil in Hyderabad, Chennai and Kolkata. It has written to the commerce department to take up the matter with Indonesia.

Under the India-Asean FTA, gold jewellery can be brought at a duty of two per cent, against 15 per cent from other countries.

But, value addition of 35 per cent is mandatory in case of gold jewellery imports.

The revenue department has asked importers to furnish bank guarantees in lieu of the duty benefits they enjoy for gold jewellery imports from Asean countries till the authenticity of value addition and the rules of origin certificates are ascertained.

"The government can act only if there is violation of the 35 per cent value addition norm or rules of origin norms in the FTA. But given mining and jewellery making takes place in Indonesia, these could be genuine imports simply leveraging the duty differential window," said an official of the Directorate of Revenue Intelligence. He added it had to be checked how the value addition was being calculated in case gold from a third country was used. "In many cases, exporters are adding their brand value to show value addition. This has to be checked."

A commerce department official said it was for the customs to check the authenticity of the certificates produced by Indonesian exporters, as it was not feasible to have a re-look at the FTA.

Ajay Sahai, director-general and chief executive of Federation of Indian Export Organisations, said the government should consider reducing basic customs duty on gold to check such instances.

"It is a case of third countries taking advantage of India's FTA with Asean. Gold is mined in Indonesia and the Chinese are shifting their gems and jewellery manufacturing there to leverage the duty differential. As they might not be flouting the FTA norms, the only way out is for the government to reduce basic customs duty on gold and gold jewellery," he said.