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The Directorate general of Foreign trade ( DGFT) is mulling an increase in value addition norms for gold jewellery to curb circular trading in gold and increase in fake exports.
According to official sources, after increasing duty on import of gold and imposing gold export obligation, fresh measures need to initiate to curb fake exports. Official sources said many instances have been reported by the directorate of revenue Intelligence where gold traders, in order to meet the export obligation, make cosmetic changes to the imported gold. The e same gold is exported and imported back which is resulting in no real export.
Since this trend has been noticed mostly in heavy items, there is a proposal to increase the value addition norms in exported jewellery from current level of three% to five%, said official sources. They also added that there is not much scope of value addition in light jewellery items.
Official sources said if such fake exports can be checked, then automatically to that extent the import will come down as well.
Many of the jewelers importing gold prefer to trade in the domestic market where the margins have shot up to as high as $70-$100 per ounce as against $4-5 per ounce earlier.
“This is highly lucrative compared to export margins”, said an industry observer.
Export of gold jewellery from India fell 6.9 percent on month in October to $608.95 million according to an industry body.
The government has taken several steps this year, including raising the tax on gold imports three times- four to 6%, 6-8% and then 8-10%, to curb import of gold to reduce its trade deficit. Besides, the Reserve Bank of India mandated an export of 20% of the total quantity of gold imported by a party as a precondition for import of gold by gold traders and jewelers.
In a move aimed at protecting the domestic jewellery industry, recently, the import duty on gold jewellery was raised from 10-15%. India, the world's largest consumer of gold, imported 393.68 tonnes of the yellow metal during the April-September period of this year, as per official data. Gold is the biggest non-essential item in India's import bill.
However, the duty restrictions resulted in a sharp fall in the imports in September this year at 12-15 tonnes which is estimated to be much lower than in the same month last year. The overall import bill for the July-September quarter on account of gold will be $2.7 billion as against $11.9 billion in the same period last year. That should help keep the current account deficit under control, said experts.
