Bullion dealers are exploiting a loophole in the Comprehensive Economic Partnership Agreement (CEPA) with the United Arab Emirates to bring gold at very low import duties.

They are reclassifying gold as platinum, taking advantage of a scheme that classifies any alloy with 2 per cent platinum as pure platinum. The dealers are registering alloys with 90 per cent gold as platinum, skirting the higher duties on gold.

This has flooded India with cheap “platinum” (mostly gold) and rattled the precious metals market. Since mid-June, India has witnessed a surge in “platinum” imports that dwarfs the entirety of 2023’s volume.

In just four weeks, nearly 13 tonnes of these “platinum” consignments, valued at nearly $1 billion, have been registered, surpassing all of India’s platinum imports from the previous year (a mere 9.97 metric tonnes). The key driver is the disparity in import duties under the CEPA. While gold imports are levied a 15 per cent duty, platinum enjoys a considerably lower rate of 5 per cent.

This 10 per cent difference allows dealers to offer substantial discounts on their “platinum,” undercutting legitimate gold importers who pay the full duty.

Riya Singh, research analyst — currency and commodities, Emkay Global Financial Services — warned that this exploitation of a technicality has real economic consequences.

The Indian government faces a potential shortfall in tax revenue due to the decline in import duties collected. Moreover, the influx of mislabeled gold is disrupting the domestic market.

The current situation underscores the need to revise the platinum import classification, a relic of outdated regulations.

“The existing rule might have served a purpose in the past,” said a bullion industry analyst, “but with platinum now trading at a discount and benefiting from lower import duties under CEPA, it’s an open invitation for
exploitation.”

Meanwhile, the Global Trade Research Initiative (GTRI) has expressed serious concerns about the import surge, urging an investigation into its impact on the domestic jewellery industry and potential revenue losses.

GTRI founder Ajay Srivastava said: “The zero-tariff policy under CEPA is projected to cause an annual revenue loss of ₹63,375 crore due to duty-free imports of gold
and silver.”