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The Union government is considering more measures to stop malpractices in exports of gold jewellery, said two people familiar with the development. On Wednesday, the Noida Export Promotion Zone customs collector issued a trade notice asking gem and jewellery exporters not to directly import gold on a loan basis.
Commerce ministry and development commissioners of special economic zones (SEZs) are also working to make improvements on the export front, while discouraging malpractices on the part of the exporters, informed knowledgeable sources.
They will now have to take gold on loan only from nominated agencies and banks. SEZ units are usually allowed to import freely but so far, as importing gold on loan is concerned, it's a banking transaction where interest is paid and hence, "banking transactions for gold exports like taking gold on loan shall be done in India and hence direct import of gold on loan is disallowed," said Rahul Gupta, chairman of Export Promotion Council for EOUs and SEZs (EPCES).
Another person familiar with the development said there was a recent meeting wherein the development commissioners of SEZs discussed the problems of malpractice and misuse on the part of the exporters.
However, the group is also said to be reviewing facilities of sending gold outside SEZ areas to domestic units. However, there are instances of misuse of work facilities. After being sent, there were questions being raised about the nature of the gold being received. There were doubts if the gold came back after the processing and designing stages were completed, or was it something entirely different that was being sent in their place.
Some cases of misuse at work facilities were also found by the gold jewellery exporting units.
The government is currently reviewing such facilities. Sources say action against such units may be taken if a case of serious misuse comes to light.
Apart from this, since last few quarters, there has been a sharp fall in gold jewellery exports from Dubai following the imposition of a duty charge on the import of jewellery from the Gulf nation. The government is also considering ways to incentivise such exports.
Around 10 days ago, the government banned exports of gold jewellery above 22 carats. This was done to stop low-value addition exports or round tripping. Round tripping is making imports and re-exporting them without major changes.
Round tripping has been a major menace in the area of gold jewellery exports. According to the Thomson Reuters GFMS Gold Survey report for first half of 2017, round tripping volumes recorded a sharp rise for the period with estimates pegging such exports to stand at 89 tonnes in the first half of 2017, up from 53 tonnes in the same period last year. "We understand the increase was primarily related to bringing forward exports as the cost of round tripping post-GST was expected to increase," stated the report.
On Wednesday, the Director General of Foreign Trade (DGFT) also liberalised norms for status holders who were entitled to export free-of-cost items for promotion subject to an annual limit of Rs10 lakh or 2 per cent of the average annual export realisations during the preceding three licensing years, or whichever is lower. This limit has been significantly increased for other sectors but the gold jewellery export sector has been kept out of the ambit of liberalisation, said the DGFT in a public notice issued on Wednesday.