‘Unusual surge’: Govt restricts imports of gold jewellery and parts

A government official said that jewellery imports under the five Harmonised System of Nomenclature (HSN) code have not been banned and only put under authorisation to ascertain the reason behind an unusual surge in imports and better monitor the geographies from where the imports are taking place.

“The imports in these categories never happened in such quality. We suddenly saw an unusual surge. A part of it was coming from FTA countries in zero duty. A part was also coming by paying duty. Because of the unusual surge, the commerce ministry consulted with different departments including the Department of Revenue, we decided to put it under a restricted list to better monitor the importers and the countries involved. It is an import authorization. Traditionally, if jewellery parts are around $50 million and it surges to $1.5 billion, then one has to look into it,” the official said.

This comes after official data showed that the imports of jewellery parts that have now been put under restricted category jumped 30 times to $1,551 million in 2023-2024 compared to $52 million during 2022-2023. Meanwhile, jewellery imports in other restricted categories which consist of jewellery studded with precious and semi-precious stones such as diamonds and pearls happened for the first time during the last financial year.

India’s total gold imports has also been on the rise, taking the goods trade deficit in April to a 5-month high of $19.1 billion. This was largely driven by gold imports that jumped by a sharp 208.99 per cent to $3.11 billion in April this year compared to $1 billion in April last year.

The Indian Express had earlier reported that just a week before the presentation of Budget 2024-25, the Finance Ministry had hiked import duties on a specific, relatively unheard category of the jewellery segment called gold findings, which are small components such as hooks, clasps, clamps, pins, screws used to hold the whole or a part of a piece of jewellery in place.

The duty was hiked taking into account a sharp surge in imports was recorded in December and January which reflected the misuse of the duty arbitrage with other gold items. Government officials were also concerned about duty evasion.

Notably, gold and silver bars attract a 15 per cent import duty, while gold and silver findings earlier faced 11 per cent import duty. Due to the difference in HSN codes for gold and silver bars as compared to gold and silver findings, importers were making use of the duty arbitrage to import gold in the form of findings and coins, rather than bars.

Elevated gold price along with high import duty on the metal are seen as one of the key reasons behind the increased cases of smuggling.