India-UAE CEPA could lead to over Rs 63,000 crore of revenue loss as imports of precious metals, diamonds surge
A new report has raised concerns over the India UAE CEPA that contains provisions that allow unlimited imports of duty-free gold, silver, platinum, and diamonds into India over the next few years, which can lead to significant revenue loss of over Rs 63,000 crore and disrupt domestic business.
The report by Global Trade Research Initiative has called for an urgent review of the provision to prevent exploitation of the tariff clauses. “This will lead to significant annual revenue losses (over Rs 63,000 crore), move import business from banks to a few private traders, and replace top suppliers with Dubai-based firms. It will also disrupt the domestic diamond and jewelry industry, with major imports coming from Gift City, which has transparency issues,” it underlined.
The Comprehensive Economic Partnership Agreement (CEPA) between India and UAE was signed in February 2022 and came into effect from May 1, 2022.
“India imported $45.5 billion worth of gold and $5.4 billion worth of silver in FY2024. Under CEPA, unlimited gold (98% gold, 2% platinum) and silver can currently be imported with tariffs of 5% and 8% respectively. Starting in 2026, gold can be imported tariff-free, and silver from 2030,” said the report, adding that this zero-tariff policy will likely shift all of India’s global imports through the UAE under CEPA.
The government then is expected to lose Rs 63,375 crore in revenue from duty-free gold and silver imports, based on FY2024 import levels, it said, adding that concessional tariff imports of gold, silver, and gold jewellery have already started from Dubai under CEPA.
In FY2024, 119.35 tonne of gold bars were imported from Dubai under the concessional duty of 1%, valued at US$7.62 billion. Silver imports from the UAE increased dramatically by 5853%, from $29.2 million in FY2023 to $1.74 billion in FY2024. The import of gold jewellery from the UAE increased by 290% from US$347 million in FY2023 to US$1.35 billion in FY2024.
It has warned that CEPA tariff concessions are hurting India’s jewellery industry, with gold jewellery imports from the UAE increasing due to lower tariffs. “Zero tariffs on cut and polished diamonds under CEPA threaten India’s domestic diamond industry, which currently benefits from zero duty on rough diamonds and a 5% duty on cut and polished diamonds,” it said, adding that the removal of tariffs could lead to a decline in the domestic industry and a shift in processing activities to countries like China.
Further, business is shifting from established importers like banks authorized by the Reserve Bank of India and the Directorate General of Foreign Trade to many private traders. “Reputable global suppliers of bullion are being replaced by Dubai-based suppliers, many of which are owned by linked Indian importers,” the report said.
It also highlighted that many imports do not meet Rules of Origin conditions, hence do not qualify for concessions, and raising the strong possibility of money laundering. “The value addition process for silver imports is questionable, with concerns about money laundering,” it said, adding that this is the reason for the shift of silver imports from Indian ports to GIFT City exchange to benefit from concessional tariffs.
