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Commerce Secretary Rita Teaotia today made a case for reviewing the import duty on gold with a view to curb arbitrage opportunities resulting from FTAs without impacting the genuine requirement of businesses.
"I think the real issue on why free trade agreements tend to be leveraged is the issue that we have been raising again and again and that is the (import) duty on gold. This is a matter that the government of India is seized of.
"There are implications on both sides and I think we will have to work to come to some sort of balance on the duty issue. It certainly needs to be addressed because as long as there is arbitrage there will be people who will try to game the system," Teaotia said.
Her statement comes against the backdrop of surge in gold imports from South Korea. India and South Korea have in place a comprehensive free trade agreement (FTA) since January 2010.
The government in August restricted imports of gold and silver items from South Korea in a bid to check spurt in inbound shipments of the precious metals from that country.
Gold import from South Korea jumped to USD 338.6 million between July 1 and August 3 this year. The figure for the corresponding 2016-17 period was only USD 70.46 million.
Addressing the Gold Summit here, GJEPC Chairman Praveenshankar Pandya highlighted the need for reducing import duty on gold to 4-5 per cent from 10 per cent, saying it encourages smuggling of the yellow metal.
He also pointed out that the FTAs need to be "examined very carefully", citing the example of the agreements with South Korea and Indonesia.
However, responding to him, Teaotia in her address asserted that India does not go into FTAs in a vacuum.
"I do want to make it very, very clear that there is a full fledged consultation with industry sectors before any single line is conceded in a trade agreement," she said adding that the government had moved very quickly on the issue of gold imports from Korea and plugged them.
As far as Indonesia is concerned, it is a gold producer so rules of origin and quality of that are an enforcement issue and that too becomes quickly plugged, Teaotia said.
Besides, the Commerce Secretary observed that the GST-related issues flagged by the industry and the department of commerce have been substantively addressed.
"There are still some gaps and we are working on those but through the nominated agencies the availability of gold has certainly been provided for, which I believe should address the requirements of the medium and small scale industries, who would need that because that is allowed to come in without the payment of 10 per cent duty," she said.
Referring to the SEEPS Special Economic Zone, Teaotia said it has seen huge traction and now perhaps the government "can look at jewellery parks which cater to the domestic as well as the international market".
She said the government intends to ramp up the cluster scheme for the gold jewellery sector, which at present provides common facility centres for workers and small companies working in diamonds.
Teaotia said government think tank NITI Aayog has set up an inter-ministerial group to discuss the components on the new gold policy for India.