India’s recent reduction of import duties on gold and silver has effectively halted the import of silver and platinum from the UAE, which previously benefited from concessionary duties under the Comprehensive Economic Partnership Agreement (CEPA). The Indian government slashed import duties on gold and silver from 15% to 6%, eliminating the duty arbitrage that bullion dealers had been exploiting.
Prithviraj Kothari, president of the India Bullion and Jewellers Association (IBJA), stated that with the regular customs duty for silver now lower than the CEPA tax, there is no incentive for dealers to import silver or platinum from the UAE. Previously, dealers imported silver at an 8% duty under CEPA, compared to the regular 15%.
This shift has drastically affected the UAE’s share in India’s silver imports, which surged to 1,998 metric tons in the first five months of 2024, up from just 133 tons in the same period last year. However, with the regular duty now at 6%, the CEPA route has become unfeasible for imports.
Bullion dealers have not approached customs to clear silver and platinum shipments under CEPA in the past two days. Nitin Kedia, national general secretary at the All India Jewellers and Goldsmith Federation, confirmed that platinum imports have also ceased due to the duty reduction.
Additionally, dealers had previously exploited a loophole by registering alloys containing around 90% gold as platinum to avoid higher duties, leading to a surge in platinum imports. Currently, around six tons of silver and two tons of stranded platinum alloy are facing losses due to a sharp drop in global prices. Importers are now left with the options to either export the silver grains back to the UAE or sell them at a discount in the Indian market.