India’s four-week platinum imports from mid June eclipsed 2023’s total as bullion dealers exploited a loophole by registering alloys containing around 90% gold as platinum to avoid higher duties, government and industry officials told Reuters.
In that time frame dealers cleared 13 metric tons of these metal consignments valued at around $1 billion from customs, compared to total platinum imports of 9.97 metric tons in 2023, said a government official who declined to be named as he wasn’t authorised to speak to media.
This masking was possible because of a government rule on classifying platinum which states that ”an alloy containing 2% or more, by weight, of platinum is to be treated as an alloy of platinum,” the official said.
Since April 1, dealers pay only 5% import duty on platinum against 15% on gold under the Comprehensive Economic Partnership Agreement signed between India and major bullion trading hub the UAE in 2022, said Nitin Kedia, national general secretary at the All India Jewellers and Goldsmith Federation.
”Because bullion dealers pay 10% less import duty on what they claim is platinum, they can offer discounts of up to 2% when selling refined gold. This puts those who import gold legitimately, paying the full 15% duty, at a competitive disadvantage,” he said.
India is the world’s second biggest consumer of gold and relies on imports to fulfil most of its requirement. It is also among the top five global consumers of platinum.
The recent shipments have resulted in New Delhi losing tax revenue. Additionally, importers are taking advantage of the lower duty to sell this imported metal at a discount, distorting prices in the local market.
Gold discounts in India widened on Monday to $34 an ounce over official domestic prices, the highest in nearly 3-1/2 months and up sharply from a discount of $9 a fortnight back.
The government established the current platinum import rule when platinum prices significantly exceeded gold prices, said a Mumbai-based bullion dealer with a private bank.
”With platinum now trading at a discount and attracting a lower import duty under CEPA, a revision of the definition is necessary.”
Value-added products were eligible for lower Indian import duty under CEPA. However in Dubai, traders are just mixing small amounts of platinum and copper into gold bars and presenting it as value addition while exporting them to India, the bullion dealer said.
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