India has banned the export of gold products with a purity above 22 carats in a move a trade group said was a bid to curb a practice known as “round tripping”.
The Directorate General of Foreign Trade issued a notification dated Aug. 14 that stated exports of jewellery or medallions, containing gold of 8 carats and above up to a maximum limit of 22 carats shall only be permitted, without giving a reason.
“Round tripping to Dubai will come down due to the move,” an official with India Bullion and Jewellers Association Ltd said. A trader, via round tripping, can import gold products at a lower import tax and re-export the same stock without any value addition.
The ban affects jewellery, including partly processed jewellery, coins and medals.
“Until now, traders only had to pay a lower import tax – or no tax at all – on gold jewellery and gold coins so long as they re-exported the gold,” Commerzbankanalyst Carsten Fritsch said in a note.
“This may also be an attempt by the authorities to prevent the current account deficit from widening again after Indian gold imports rose sharply in recent months.”
India’s gold imports in July nearly doubled from last year to $2.1 billion, while the country’s trade deficit narrowed to $11.45 billion in July from a month ago, following a slowdown in merchandise imports.
India is the world’s No. 2 consumer of gold behind China, with many saving their money in gold, using it to hedge against inflation and for gifts at special occasions. The country imports about 800 tonnes of gold a year.
Spot gold fell on Wednesday for the third straight day as the dollar edged higher on the back of robust U.S. economic data and an easing in tensions over North Korea.
Source: Reuters (Reporting by Koustav Samanta and Arpan Varghese in Bengaluru, Rajendra Jadhav in Mumbai; editing by Susan Thomas)