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Government tightens norms for gold jewellery to stop circular trading

On March 31, Government announced new Foreign Trade Policy that tightened the value-addition and wastage norms for the export of gold jewellery. The new norms will help restrict round-tripping of gold and cut its import of the commodity into the country.

Since last few years, round tripping of gold has been estimated at around 150 tonnes as per the reports. Round-tripping refers to import of gold, followed by export, with minor value-addition, to avail of several benefits. It leads to greater import. Disappointed over higher import duty on gold, gems, jewellery exported had pinned high hopes on the new Foreign Trade Policy.

In the new Foreign Trade Policy announced on March 31, the government has tightened value-addition and wastage norms for the export of gold jewellery. The new norms will help restrict round-tripping of gold and cut its import of the commodity into the country. For plain jewellery articles, the wastage norm assumed has been cut from 3.5 to 2.5 per cent, while that for value-addition has been raised from three per cent to four per cent.

New Norms in Foreign Trade Policy

The new norms introduced by the Government will help restrict round-tripping of gold and cut import of the commodity into the country. For plain jewellery articles, the wastage norm has been cut from 3.5 to 2.5 per cent, while that for value-addition has been raised from 3-4 per cent. The value-addition norm for machine-made jewellery has been raised by 0.5 per cent to 2 per cent. This adds to the cost of exporting, making round-tripping unviable. Genuine jewellery exports, however, won’t be hit.

According to reports, an official said the government’s decision followed several rounds of discussion. Pankaj Parekh, Vice-chairman, Gems and Jewellery Export Promotion Council, said, “The new norms will help control circular-trading of gold jewellery; those genuinely adding value will continue to do well.” In 2014-15, star trading and export houses are estimated to have imported about 400 tonnes of gold, with a part of it being exported. Some entities are said to have exported the gold with negligible value-addition.

The value-addition norm for machine-made jewellery has been raised by 0.5 per cent to two per cent, making circular-trading unviable, said an analyst, adding gold import would decline by 150-200 tonnes a year.