India has told Thailand that it will impose duty on gold jewellery imports from the southeast Asian country in the range of 6-10 per cent as applicable to other countries against zero per cent at present in a proposed free trade agreement (FTA), negotiations of which are currently going on.
While the markets are abuzz with speculations that India will impose a ban on gold imports from Thailand, the Commerce Ministry has ruled it out.
India has communicated to Thailand that it will not allow gold jewellery imports at the concessional rates or zero rate, Commerce Ministry officials told Business Standard.
Thailand has not responded so far.
"Negotiaions for FTA are still going on. We have taken up the issue with Thailand. We believe duties have to be consistent with our domestic policy. But, we are definitely not going to impose a ban on its import. The response from Thailand is awaited," the official said.
Currently, India has early harvest scheme (EHS) with Thailand under which gold jewellery is imported at zero per cent. This concession is available only if there is minimum 20 per cent value addition in jewellery in Thailand before coming to India.
India cannot increase duty on import of gold jewellery under EHS and has to depend on the proposed FTA. "Now, that the government has frozen the rate under EHS, it will not be able to re-impose the duty. To do that, they will have to restart the negotiations from the beginning under FTA talks," said Ajay Sahai, director general, Federation of Indian Export Organisations (FIEO).
The government suspects that the norm of value addition of 20 per cent is not being adhered to. In fact, instead of gold jewellery, gold is being imported into India, it is suspected.
Gold and oil imports were the prime reasons for widening India's current account deficit to a record 5.4 per cent of GDP in the second quarter of the current financial year. While oil imports cannot be curtailed beyond extent, the government is trying hard to curb import of gold.
Gold imports in 2011-12 stood at $56.5 billion, which had widened India's current account deficit to a record 4.2 per cent of GDP.
In the first nine months of the current fiscal, however, gold imports declined 15 per cent to stand at 38 billion dollars.
During April-November, 2012-13, gold jewellery imports from Thailand stood at 92 million dollars against just 13 million dollars in the entire 2011-12, said Sahai. Most of these imports--72 million dollars--came in just two months--October and November.
Earlier this month, the government increased customs duty on standard gold bars by 2 percentage points to 6 per cent to cut down imports of these metals into the country.
In January 2012, basic customs duty was increased from Rs 300 per 10 gram to an ad valorem rate of 2 per cent on standard gold bars and on non-standard gold bars to 5 per cent. Further, in the Budget in March 2012 it was doubled to four per cent and 10 per cent, respectively.
