India’s four-week platinum imports from mid-June have eclipsed the country’s total platinum imports for 2023, as bullion dealers have been exploiting a loophole to register alloys containing around 90% gold as platinum in order to avoid higher import duties.
In this 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, according to a government official.
This was possible due to a government rule that states “an alloy containing 2% or more, by weight, of platinum is to be treated as an alloy of platinum.” Since April 1, dealers have been paying only a 5% import duty on platinum, compared to 15% on gold under the Comprehensive Economic Partnership Agreement signed between India and the UAE in 2022.
By claiming the imports as platinum, bullion dealers can offer discounts of up to 2% when selling refined gold, putting those who import gold legitimately, paying the full 15% duty, at a competitive disadvantage.
This has resulted in New Delhi losing tax revenue, and importers taking advantage of the lower duty to sell the 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.
Experts say a revision of the definition of platinum imports is necessary, as platinum prices are now trading at a discount to gold and attracting a lower import duty under the CEPA agreement.