The India-UAE Comprehensive Economic Partnership Agreement (CEPA) operational since May 1, 2022, may lead to a revenue loss of over ₹63,000 crore due to the gradual lowering of tariffs on the import of gold, silver, platinum, and diamonds from the UAE into India in the coming years, a recent report published by Delhi based Global Trade Research Initiative (GTRI) estimates.
“Currently, gold can be imported from Dubai at 5% duty, but this will drop to zero in three years if the alloy contains 2% platinum. Silver imports from the UAE have surged due to an 8% duty under CEPA, compared to a 15% MFN tariff, resulting in a significant tariff arbitrage. India will reduce the duty on silver to zero over ten years, causing a revenue loss due to the shift of imports from other sources to the UAE. Zero tariffs on cut and polished diamonds under CEPA threaten India's domestic diamond industry, which currently benefits from zero duty on rough diamonds and a 5% duty on cut and polished diamonds. The removal of tariffs could lead to a decline in the domestic industry and a shift in processing activities to countries like China,” the report warns.
According to GTRI, the zero-tariff policy under CEPA is projected to cause an annual revenue loss of ₹63,375 crore due to duty-free imports of gold and silver, based on FY2024 import levels.
“India imported $45.5 billion worth of gold and $5.4 billion worth of silver in FY2024. Under CEPA, unlimited gold (98% gold, 2% platinum) and silver can currently be imported with tariffs of 5% and 8% respectively. Starting in 2026, gold can be imported tariff-free, and silver from 2030. This zero-tariff policy will likely shift all of India’s global imports through the UAE under CEPA. The government then is expected to lose ₹63,375 crore in revenue from duty-free gold and silver imports, based on FY2024 import levels”, the report explains.
Similarly, it also points out that in FY2024, 119.35 tonnes of gold bars were imported from Dubai under the concessional duty of 1%, valued at $7.62 billion. Silver imports from the UAE increased by 5853%, from $29.2 million in FY2023 to $1.74 billion in FY2024. The import of gold jewellery from the UAE increased by 290%, from $347 million in FY2023 to $1.35 billion in FY2024, it adds.
The GTRI report points out that India-UAE CEPA in the current form will result in a gradual shift in the import business of these metals from banks to a few private traders, and replace top suppliers with Dubai-based firms. It will also disrupt the domestic diamond and jewelry industry, with major imports coming from Gift City, which has transparency issues, it adds, and calls for a review of CEPA by the government.
