Govt bans exports of gold products above 22 carats

The government has banned the export of gold products with purity above 22 carats, in a move to curb the practice of "round tripping" by the trade.

Traders use ''round tripping'' to import gold products at a lower import tax and re-export the same stock as value added, but without any value addition, to cheat the government.

The Directorate General of Foreign Trade on Monday issued a notification stating that exports of jewellery or medallions, containing gold of 8 carats and above up to a maximum limit of 22 carats shall only be permitted.

While the DGFT did not give any reason for the ban, sources at the India Bullion and Jewellers Association Ltd said the move will help curb "Round tripping to Dubai.''

While the ban will affect exports of jewellery, including partly processed jewellery, it will hurt coins and medals exports the most.

Traders used to avail of low import duty (or no tax at all) on gold jewellery and gold coins so long as they re-exported the gold, which has only added to the country's gold imports.

India's gold imports nearly doubled year-on-year to $2.1 billion in July, while the country's overall trade deficit shot up to above $50 billion in the first four months of the current financial year amidst zooming imports.

This is partly due to a jump in purchases from South Korea, with which India has a free-trade agreement. Importers have previously used free-trade treaties with countries such as Thailand and Indonesia to escape the import duty.

Gold medallions and coins made up 15 per cent of the country's total gems and jewellery exports by value in the financial year ended March, according to data from the Gems & Jewellery Export Promotion Council.

India, the second biggest consumer of gold behind China, imports about 800 tonnes of gold on an average annually.