Importers looking to import gold in the country without paying any duty have found a novel way of doing it by importing gold in the form of platinum alloy from countries like Thailand, Indonesia, and Tanzania.

According to multiple sources familiar with the development, importers are using a legally available route by importing alloy that has a platinum content of more than two percent – the rest is predominantly gold – and be in complete compliance with the Customs Tariff Act.

While platinum alloy imports are generally taxed at 5 percent if imported from UAE (0.5 percent customs duty + 4.5 percent Agriculture Infrastructure and Development Cess), the India-ASEAN Free Trade Agreement and India’s Duty-Free Tariff Preference Scheme for Least Developed Countries allows such imports from countries like Thailand, Indonesia, and Tanzania at zero duty.

Meanwhile, the duty on gold import is six percent.

This is how it works. Sources say that the crux of the issue is the definition of platinum alloy. As mentioned above, the Customs Tariff Act states that an alloy that contains platinum in excess of two percent qualifies as platinum alloy. In other words, an importer can have just two percent of platinum in the alloy and the rest 98 percent could be gold.

Sources further add that select Indian importers from the Delhi and Gurgaon region have mastered this channel and are importing gold disguised as platinum alloy from countries like Thailand, Indonesia, or Tanzania to take advantage of the zero-duty agreements.

The Indian importers have started using the Thailand and Indonesia route only since November, the data for which comes with a lag. Meanwhile, once imported in India, the importers refine the mixture to separate the gold, which can be sold freely in the domestic market, said people with direct knowledge of the matter.

Moneycontrol has reviewed a recent bill of entry of an importer that showed that the seller was based in Thailand and the importer bought around 80 kgs of platinum in semi-manufactured form. More importantly, the platinum alloy it imported had 89 percent of gold content, 4 percent of platinum with the rest being other materials used to prepare the alloy.

UAE out of favour post Union Budget Until August, Indian importers used a similar trick to bring gold disguised as platinum alloy from the UAE. However, after the Union Budget reduced the import duty on gold from 15 percent to 6 percent, the profit margin from this loophole reduced.

Yet, while a section of Indian importers continue to use the UAE route to get the one percent duty arbitrage – platinum alloy imported from UAE attracts five percent duty -- regions like Thailand, Indonesia, and Tanzania are coming up as big hotpots for importing platinum alloys.

Also, it is important to note that platinum alloy imports which were close to nothing till 2018, suddenly increased to 633 kgs in 2019 and went to 28,183 kgs in 2024, as per data from Volza, an import export data provider.

Loss to the exchequer

The primary affected party in this whole operation is the government, which loses significant amount of revenue that could have come by way of duties on gold import. Also, the remittances which go from India to these countries are going for gold and not platinum.

This also impacts the smaller players in the gold market as entities that import gold disguised as platinum alloy while avoiding duties are able to sell the precious yellow metal in the domestic market at a lower rate as well while still safeguarding their profit margins.

Courtesy: Moneycontrol