Gold being imported under disguise of platinum to gain from lower duty

Thanks to an ambiguous law on the import of platinum alloys, some bullion importers are making big profits. A handful of them are importing refined gold cloaked as platinum alloy. Gold attracts 15 per cent import duty, as opposed to platinum alloy that invites a duty of 10.75 per cent.

Industry sources say this is a case of mis-declaration and duty violation. Yet the Customs has cleared consignments in the past two weeks since the legal semantics in the notification have not clearly defined alloys of precious metals to prevent misuse. The process of amendment to the notification, however, has begun.

“The Customs recently cleared some consignments imported as platinum alloys at 10.75 per cent import duty. These assignments of platinum alloy contained 96 per cent gold. On the other hand, gold attracts 15 per cent import duty. It’s a big blow to bullion refineries that import unrefined dore gold at 14.35 per cent duty,” said a gold refiner.

These importers are importing refined gold under the guise of platinum alloy and making bullion bars. They declare the goods as platinum rods, which have 4 per cent platinum and 96 per cent gold content. On 4 per cent platinum alloy, importers were paying 10.75 per cent import duty. 

In the past two years, the import duty on gold has been raised to 15 per cent, while the effective duty on platinum remained at 10.75 per cent. This issue of importing gold disguised as platinum has come to light in the past few weeks, said a source in the know. 

The Customs notification reads: “Any alloy (including a sintered mixture and an inter-metallic compound) containing precious metal is to be treated as an alloy of a precious metal if any one precious metal constitutes as much as 2 per cent by weight of the alloy and hence, an alloy containing 2 per cent or more, by weight, of platinum is to be treated as an alloy of platinum.”

Simply put, if the platinum content is less than 2 per cent, the same imported product becomes a gold alloy and not a platinum alloy. The imports mentioned earlier are not illegal, and importers are using the ambiguity in the rules and importing gold by mis-declaring it as platinum, said industry players.

Surendra Mehta, national secretary, Indian Bullion and Jewellers Association, says, “The platinum bars containing 2 per cent or more of platinum alloy under HSN Code 71101900 can now be imported at basic duty, which is only 7.5 per cent against basic duty of gold at 12.5 per cent. Earlier it was the same rate of duty on gold as on platinum. With the government’s decision to increase the duty on gold and not on platinum, it has led to this loss in the exchequer.” 

We have requested the government to increase duty on all precious metals, including platinum, and bring the duties on a par with gold, adds Mehta. 

According to sources close to the development, the Director General of Foreign Trade has by way of an office memorandum recommended that the revenue department under the finance ministry amend the notification to plug this legal ambiguity gap.