The Indian bullion market is witnessing a sharp uptick in the import of silver ornaments from Thailand, reportedly facilitated through the Free Trade Agreement (FTA) between the two countries.
However, government sources and trade analysts have raised red flags over the “modus operandi” being adopted by certain importers—who are exploiting duty exemptions under the Free Trade Agreement (FTA) to bring in silver ornaments at zero duty, only to later convert them into silver bars domestically.
Duty Arbitrage: How the Loophole Works
Under the existing import tariff regime Silver Bars attract a Basic Customs Duty (BCD) of 6%, in addition to other applicable levies. Silver Ornaments, when imported under normal trade terms, carry a steep BCD of 20%. However, silver ornaments imported from Thailand under the India-Thailand FTA are exempt from customs duty, provided they meet the Rules of Origin criteria.
Industry insiders report that importers are deliberately routing high-purity silver (916 or 920 grade) in the form of ornaments from Thailand under zero-duty FTA provisions. Once cleared through customs, these ornaments are melted and recast into silver bars, which are then sold in the domestic market.
This process not only circumvents the 6% duty applicable to bar imports but also avoids the 20% duty that should ideally apply to ornamental imports outside the treaty scope.
Recent Surge Backed by Data
Customs import data shows a notable increase in silver ornament imports from Thailand in the last two quarters. The volume and value of such imports have grown disproportionately compared to traditional consumer demand for ornamental silver, suggesting an alternate intent behind the transactions.
Experts Call for Policy Review
“FTA benefits are meant to promote genuine trade, not facilitate roundabout ways to avoid taxation,” said a senior official from the Ministry of Finance. “When ornaments are used as a disguise for importing bullion, it amounts to abuse of treaty provisions.”
Bullion market veterans echo similar concerns. “There is a growing trend of misusing treaty routes to bring in precious metals. Unless authorities step in with stricter monitoring and origin checks, this could become a systemic revenue leakage,” said a Mumbai-based bullion analyst.
Government Likely to Tighten Norms
With the spotlight now on this practice, the Department of Revenue under the Ministry of Finance is reportedly reviewing the FTA policy implementation with Thailand, especially concerning high-purity precious metals.
There may soon be enhanced scrutiny of imports, including:
- Closer examination of certificate of origin authenticity,
- Verification of end-use of imported ornaments,
- Post-clearance audits to check for conversion activities.
Additionally, the CBIC (Central Board of Indirect Taxes and Customs) may issue new circulars or advisories to field formations to plug such loopholes.
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