These new measures come after official data revealed that imports of jewellery parts surged 30 times, reaching $1,551 million in 2023-2024, up from $52 million in the previous year. Imports from the UAE under the free trade agreement (FTA) are exempt from these restrictions. Investigative agencies, concerned about the rise in gold imports, have highlighted the misuse of lower tariffs by importers, especially from Least Developed Countries (LDCs) and nations with FTAs with India. The sudden spike in imports has prompted scrutiny and inter-departmental consultations.

A government official clarified that while imports under five Harmonised System of Nomenclature (HSN) codes have not been banned, they have been placed under authorization to better monitor and understand the surge. “The imports in these categories never happened in such volumes. We suddenly saw an unusual surge. Part of it was coming from FTA countries at zero duty, and part was also coming by paying duty. Due to this, the commerce ministry, in consultation with the Department of Revenue, decided to put these imports under a restricted list to better monitor the importers and the countries involved,” the official explained.

This decision follows data showing a sharp increase in overall gold imports, which significantly contributed to a five-month high trade deficit of $19.1 billion in April. Gold imports in April 2024 surged by 209% to $3.11 billion compared to $1 billion in April 2023.

Previously, just a week before the Budget 2024-25 presentation, the Finance Ministry had increased import duties on gold findings, small components like hooks and clasps used in jewellery. This hike aimed to curb the misuse of duty arbitrage seen in December and January. Gold and silver bars are subject to a 15% import duty, whereas gold findings previously faced an 11% duty. Importers exploited this difference by importing gold as findings and coins rather than bars, prompting the government to take action against duty evasion.