Monday, April 29th 11:23 AM IST

India to temporarily suspend SEZ Gold transactions

# India gold  # SEZ  # import tariff value  # gold imports  

The government is also planning to impose a minimum 5% value addition requirement on all gold exports from SEZs.

NEW DELHI(BullionStreet): World's largest gold consumer, India has decided to temporarily halt pure gold imports and exports via Special Economic Zones (SEZ) following reports of rampant diversion of the duty-free yellow metal to domestic markets.

The government has also asked the Reserve Bank of India is looking into sale of gold coins and gold-related investment products by about 30 banks to find out whether their employees are mis-selling such products to customers.

The government is also planning to impose a minimum 5% value addition requirement on all gold exports from SEZs.

Reports said a number of SEZ units were found to be indulging in trading gold instead of manufacturing, taking the advantage of the zero duty in the tax-free zones.

SEZ units earn arbitrage profits as high as 7.5% (6% customs duty plus 1.5% excise duty) if they divert imported gold to the domestic market. Gold trading and medallion manufacturing does not involve much capital, infrastructure or labour.

The banks are under the scanner following complaints of customers being induced by bank employees and non-staff members within bank premises for purchase of gold coins, gold-related investment products and other wealth management schemes.

The central bank is studying the business practices of 30 banks to ascertain any mis-selling of these products and to find whether such products are being sold as a pre-condition for offering the regular banking services.

Meanwhile, the government has raised the tariff value of gold to $472 per 10 gram on account of a volatile price trend in global markets.

However, the import tariff value of silver has been kept unchanged at $762 per kg. Tariff value is the base price on which the customs duty is determined to prevent under-invoicing.

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