India’s duty cut halts concessionary silver, platinum imports from UAE

India’s silver and platinum imports from the UAE, previously benefiting from concessionary duties under a trade agreement, have ceased as the government’s move to reduce import taxes eliminated the duty arbitrage that bullion dealers were exploiting.

The world’s second-biggest bullion consumer slashed import duties on gold and silver on Tuesday to 6 per cent from 15 per cent.

Prithviraj Kothari, president of the India Bullion and Jewellers Association (IBJA), said that after the reduction, there is no incentive to bring silver or platinum into India under the Comprehensive Economic Partnership Agreement (CEPA) signed between India and the UAE.

“Now that regular customs duty for silver is lower than the tax under the CEPA, nobody’s importing silver anymore.”

Bullion dealers primarily imported silver from the UAE under the CEPA, as they only needed to pay an 8 per cent import duty compared to the regular 15 per cent.

This helped the UAE corner nearly half of India’s silver imports, with its shipments surging to 1,998 metric tonnes in the first five months of 2024 from just 133 tons during the same period a year ago.

However, with the regular duty now reduced to 6 per cent, imports via CEPA have become unfeasible, dealers said.

A government official said that in the past two days, bullion dealers have not approached customs to clear silver and platinum shipments under CEPA.

Nitin Kedia, national general secretary at the All India Jewellers and Goldsmith Federation, said platinum imports have also stopped because of the duty cut.

India’s four-week platinum imports from mid-June eclipsed 2023’s total as bullion dealers exploited a loophole by registering alloys containing around 90 per cent gold as platinum to avoid higher duties, sources told Reuters.

Around six tonnes of silver and two tons of platinum alloy have been stranded due to the change in the duty structure, and importers are now facing losses because of a sharp drop in global prices, said a Mumbai-based bullion dealer.

“Importers must now either export silver grains back to the UAE or sell them at a discount in the Indian market,’ the dealer said.

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