After the reduction, there is no incentive to bring silver or platinum into India under the Comprehensive Economic Partnership Agreement (CEPA) signed between India and the UAE, said Prithviraj Kothari, president of the India Bullion and Jewellers Association (IBJA).
“Now that regular customs duty for silver is lower than the tax under the CEPA, nobody’s importing silver anymore.”
Bullion dealers primarily imported silver from the UAE under the CEPA, as they only needed to pay an 8% import duty compared to the regular 15%.
This helped the UAE corner nearly half of India’s silver imports, with its shipments surging to 1,998 metric tons in the first five months of 2024 from just 133 tons during the same period a year ago. However, with the regular duty now reduced to 6%, imports via CEPA have become unfeasible, dealers said. In the past two days, bullion dealers have not approached customs to clear silver and platinum shipments under CEPA, said a government official.
The imports of platinum have also stopped because of the duty cut, said Nitin Kedia, national general secretary at the All India Jewellers and Goldsmith Federation.
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, sources told Reuters.
Around six tons of silver and two tons of platinum alloy have been stranded due to the change in the duty structure, and importers are now facing losses because of a sharp drop in global prices, said a Mumbai-based bullion dealer.
“Importers must now either export silver grains back to the UAE or sell them at a discount in the Indian market,” the dealer said.