29-Jul-2013
NEW DELHI: The government has said any gold export from the special economic zones (SEZ) must be done only after a certain minimum value has been added, a measure that is expected to further dampen demand for the precious metal.
All gold exports from SEZs will need to have at least three percent value addition on the imported gold to check instances of gold diversion from these zones to the domestic market because of duty differential.
SEZs can import gold at zero duty to make jewellery for export against 8% duty on gold imported for domestic consumption, creating a powerful incentive for export units to divert imported gold to the domestic market.
"As part of measures to check widening current account deficit and diversion of gold from SEZs, we have imposed a 3-5% value addition on all gold exports from these zones to ensure only genuine gems and jewellery manufacturers operate through SEZs. We have communicated this to all the development commissioners", a commerce department official told ET.
The move is In addition to the ban on gold trading imposed on SEZs in April, which led to a sharp reduction in gold exports from these duty free zones.
A number of units were found to be indulging in gold trading instead of manufacturing, taking the advantage of the zero duty in the tax-free zones.
SEZ units earn arbitrage profits as high as 9.5% (8% customs duty plus 1.5% excise duty).
Plain gold jewellery and articles and ornaments like mangalsutra containing gold and black beads/imitation stones, except in studded form of jewellery, needs to have a minimum of 3% value addition.
All types of studded gold jewellery and articles thereof, need to have a minimum of 5% value addition.
"There will be stringent checks on gold transactions in SEZs", the official said.
The department of commerce had suspended gold trading and medallion manufacturing in the special economic zones in May after complaints of diversion of gold from some SEZs by the revenue department.
With concerns over falling rupee, RBI and government have taken a series of measures in the last three months to check gold imports, the primary factor for the widening current account deficit, which touched a record high of 4.8% of the GDP in 2012-13.
The official said genuine gems and jewellery manufacturing involves a change in composition of gold and thus the imposition of value addition norm will not impact such exports.
Source:-economictimes.indiatimes.com
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