Mint Impact: India plugs the loophole that allowed gold importers to evade duty
India has placed gold compounds and 12 other items in the restricted trade category to curb evasion of import duty.
The Directorate General of Foreign Trade (DGFT) has amended its import policy, moving gold compound (HS code 28433000) from 'free' to 'restricted' list, according to a notification on 18 June. Which means, importers will now need a licence from the DGFT to bring such compounds into the country.
Also Read | Gold is nearing ₹1 lakh, but experts believe there's still room to grow
Mint reported on 12 June how importers were using a loophole to bring in gold compounds–also called liquid gold–instead of actual gold and saving up on the 6% duty. Gold compounds, used in industrial applications, attract no duty if imported from the UAE, Japan and Australia, which have trade pacts with India.
Imports of such compounds soared 9.25 times over a year earlier and 2.84 times quarter-on-quarter to 69,879kg in the January-March period, showed data from the Directorate General of Commercial Intelligence and Statistics (DCGIS). That's equivalent to $1.29 billion worth of gold imports.
By comparison, actual gold shipments fell 51.2% sequentially and 0.9% over a year earlier to $9.5 billion in Q4 FY25.
Also Read | Gold is back under pressure after a stunning surge. What's driving the dip?
The government lost ₹906 crore in customs duty in FY25 because of import of gold compounds instead of actual gold, according to Mint's calculations.
According to data from the DGFT, around 87% of the gold compound imports came from the UAE, Japan and Australia.
Till now, any individual could import liquid gold without any questions asked on its end use.
Also Read | Gold surpasses Euro as second-largest global reserve asset, ECB says
In a separate notification, the DGFT put palladium, rhodium and iridium alloy with more than 1% gold under the restricted category.
According to the Customs Tariff Act, an alloy with platinum in excess of 2% qualifies as a 'platinum alloy'. But importers were bringing in an alloy with just 2% platinum and 98% gold, and avoiding duty on the yellow metal.
Likewise, importers could bring in alloys with traces of palladium, rhodium or iridium, and avoid duty by disclosing them as alloys.
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