The Directorate General of Foreign Trade (DGFT) in the Union Commerce Ministry has banned duty free imports of gold, silver items from South Korea.
These restrictions were imposed against the backdrop of sudden surge in imports of precious metals from South Korea, with which India has a free trade agreement (FTA) since January 2010. Now, importers will now have to obtain a license from the DGFT for importing gold and silver from South Korea.
Under the India-South Korea FTA, India has allowed duty free import of gold and silver items. However, 12.5% countervailing duty was imposed to offset equal level of excise duty on gold and silver jewellery items produced domestically.
After goods and services tax (GST) regime was implemented from 1 July 2017, countervailing duty was abolished as it subsumed excise duty and only 3% GST was imposed on gold. This created a situation where importing gold via South Korea became profitable due to its duty free status with India even as government continued to impose 10% basic customs duty on gold imports from other countries. Between 1 July and 3 August 2017, gold imports from South Korea surged to $339 million against import of only $70.5 million in 2016-17.
India is the world’s second largest gold consumer after China, with consumption of 674 tonnes in 2016. According to the World Gold Council (WGC), India’s gold demand is projected to rise to between 850 tonnes and 950 tonnes by 2020 from an estimated 650-750 tonnes in 2017.
Directorate General of Foreign Trade (DGFT)
The DGFT is the nodal agency responsible for execution of the import and export Policies of India. It is entrusted with responsibilities for formulating and implementing the foreign trade policy with the main objective of promoting India’s exports.