New Delhi, Feb. 20: The government has suspended the import of gold at a concessional duty from Thailand to put a check on the widening current account deficit.
“The commerce department has written to the department of revenue asking it to issue a notification suspending the import of gold jewellery from Thailand under the provisions of the early harvest scheme till the certificates of origin issued by Thailand are verified to our satisfaction,” an official statement issued by the commerce department said.
The development follows concerns that the bilateral free trade agreement is being misused to route the yellow metal through Thailand.
The import of gold jewellery from Thailand attracts a concessional duty of only 1 per cent. A 10 per cent tax is levied on imports from other countries.
According to the trade pact, there has to be 20 per cent value addition in gold jewellery imported from Thailand to make it eligible for the duty concession. Sources said the government suspected that the norm was being flouted and instead of jewellery, gold was being imported.
The Centre also believes that bulk of the jewellery imported from Thailand is coming from China and Malaysia because Thailand is not known as a jewellery producer.
The government is examining all factors that have contributed to a ballooning current account deficit, and the surge in gold imports is one of the major reasons.
According to estimates, the import of gold jewellery from Thailand stood at $72.25 million in 2011-12 compared with total gold jewellery imports at $1.45 billion, with Dubai and Hong Kong among the lead exporters.
Last month, the government had hiked the import duty on the yellow metal to 6 per cent from 4 per cent to check the current account deficit, which hit a record high of 5.4 per cent of the gross domestic product in the second quarter of this fiscal.
The RBI today tightened norms for import of precious and semi-precious stones by imposing a limit of 90 days towards letter of credit.