Plug to curb zero-duty imports held up in talks.

The commerce ministry is yet to provide feedback to the finance ministry on a matter that allows traders to import gold coins and articles at close to zero-duty from Asean countries. Such imports distort the market by allowing the importers to earn a windfall by onselling the articles and coins at 10% basic customs duty on bullion, trade sources told ET. 

Already, 100 kg of imports were cleared this week at Delhi customs and another 500 kg would be cleared between Friday and Monday. India has signed free trade agreements with Asean nations which facilitate imports at concessional rates of duty. 

Since these are bilateral trade treaties, the finance ministry, which levies taxes relating to such agreements, can impose them only after consultation with the commerce ministry. The finance ministry has reportedly apprised the commerce ministry of the matter and is awaiting its observations. 

"These imports are not just causing a loss of revenue to the government by way of foregone customs duty but are distorting trade," said Rajesh Khosla, MD, MMTC-Pamp. "I expect a flood of gold coin imports from South Korea until the government imposes a cess to plug the loophole." 

The loophole, which was plugged in the middle of last year when the government imposed 12% excise duty to safeguard the domestic market, surfaced again after the introduction of GST, which subsumes excise and other levies. 

There is a 3 per cent GST on gold but since countervailing duty has been subsumed into the new tax, such imports from Asean have started again. Khosla has represent ed the "pressing" issue to CBEC chairman, Vanaja N Sarna. "If this issue isn't addressed we will have to approach the finance minister," added Khosla. 

The way out is for the country to im pose a safeguard duty equal to the customs duty, which under the WTO rules can be done unilaterally unlike imposing an anti-dumping duty which has to be agreed upon bilaterally. 

The other option is to impose a GST cess on such imports. "While IGST levied on import of gold is available, the BCD is a cost, hence duty-free imports would provide an advantage to importers," said MS Mani, partner-indirect tax, Deloitte Haskins & Sells. 

"Imposition of a cess or surcharge could be one way of levelling the arena. However, it must be ensured that such actions are in line with trade and bilateral commitments."