Govt may modify trade pact with South Korea to contain gold imports
The government may make some amendments in India's free trade pact with South Korea to contain sudden flood of imports from the East Asian country.
"We have five options in front of us. One of them could be imposing safeguard duty. But it is a time-taking process as investigations take at least a month's time to conclude. We may even review and amend FTA (free trade agreement) with South Korea," a senior government official told Moneycontrol.
The Reserve Bank of India, finance and commerce ministry are looking into the matter and may come up with a suitable measure very soon. The government is trying to ascertain if traders are misusing any clause under free trade agreement. “We are trying to find out if it is being done by South Korea or some others are using the country as a channel,” the official said.
India has a FTA with the South-East Asian nation since 2009 under Comprehensive Economic Partnership Agreement (CEPA), which has eliminated the basic customs duty (BCD) levy on imports of the yellow metal.
According to news agency Press Trust of India, gold imports from South Korea, has jumped to USD 338.6 million during 1 July and 3 August this year. India is the world's second biggest gold consumer after China and imported USD 70.46 million gold in 2016-17. Currently, gold imports attract 10 percent BCD.
Another official aware of the matter said that the situation is a cause of concern and the government will soon take measures to curb inward shipments of gold. Till June, a trader had to pay 12.5 percent excise duty on gold and jewellery, which was acting as a countervailing duty (CVD) for imports under FTA with South Korea.
After the rollout of Goods and Services Tax (GST) from July 1, the excise duty was subsumed. Currently, only three percent integrated GST (IGST) is levied on imports.
"Now the protection from gold imports under the treaty has also gone," the official explained.The official pointed out exporters could be misusing the absence of the 'value addition norms' in its trade pact with South Korea. According to the norm, certain value-addition has to be done to the raw material before exporting it to another country.