Alert: Government Imposes New Restrictions on Gold; Tensions Rise for Bulk Buyers..

Taking a major decision regarding gold imports, the government has further tightened the regulations governing them. Just two days ago, the import duty on gold was raised from 6 percent to 15 percent. Now, the government has also tightened the rules for duty-free gold imports under the Advance Authorization Scheme (AA). Under the AA scheme, businesses are permitted to import gold without paying duty, provided it is intended for export purposes. The government apprehends that, following the hike in import duties, certain individuals might misuse this scheme to import gold on a large scale and exploit the resulting price arbitrage opportunities. To preempt this possibility, the government has implemented several new control measures.

Implementing a new rule, the government has capped the maximum quantity of gold that can be imported under a single Advance Authorization at 100 kilograms. The objective behind this move is to curb large-scale duty-free gold imports.

**Physical Inspection for New Applicants**

Going forward, new businesses applying under this scheme for the first time will be subject to a physical inspection of their manufacturing units. This means a team of officials will conduct an on-site visit to verify whether actual production activities are indeed taking place at the facility.

**New Authorization Only Upon Completion of Previous Export Obligations**

The government has also clarified that a new Advance Authorization will be issued only after the applicant has fulfilled at least 50 percent of the export obligations stipulated under their previous authorization. This measure aims to ensure that businesses cannot circumvent the 100-kilogram import limit by obtaining multiple separate authorizations.

**Fortnightly Reporting Mandated**

Businesses availing the benefits of the AA scheme are now required to submit comprehensive details regarding their imports and exports every fortnight (i.e., every 15 days). Additionally, the regional offices are now mandated to submit a monthly report to the government detailing the authorizations issued during that period, along with the associated import and export activities.

**Why the Government's Concern?**

Experts believe that the recent hike in import duties could lead to a significant disparity between domestic and international gold prices. In such a scenario, some traders may attempt to generate substantial profits by utilizing the duty-free import scheme. The government's current focus is on ensuring that the AA scheme is utilized solely for genuine export activities and is not misused for speculative purposes or tax evasion.

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