NEW DELHI: Thailand has agreed to retrospectively re-examine rules of origincertificates issued to Indian gold importers after New Delhi said third-country gold was routed through Thailand to take advantage of concessional duty available under India-Thailand free trade agreement. If any certificate is found lacking, importer will have to cough up additional duties, spelling more miseries for the sector that has been on the policy radar for worsening India's current account deficit. In the worst case scenario, the imported gold can also be confiscated if malafide intent to evade taxes is established. "Thai authorities have agreed to relook at the rules of origin certificates issued in over more than a year," a finance ministry official told ET.
The objective of exercise is to see if the certificates were issued in line with all the prescribed conditions. India had raised customs duty on gold jewellery in January 2012 and then again in March from a low of 1 per cent to 10 per cent in a desperate bid to curb imports of the metal that is largely responsible for the record current account deficit.
Earlier this year, India suspended gold imports from Thailand after Directorate of Revenue Intelligence found after in nationwide raids on gold importers that the country was being used to import gold because of low-import duty available under India-Thailand tax treaty. India-Thailand free trade agreement allows gold imports at concessional duty of 1 per cent, but these imports have to be backed by rules of origin certificates to ensure the benefit is available to Thai businesses.
Rules of origin certificate is a document that certifies that the particular good being exported has been produced or substantially value added in a particular country. For an exporter to claim such a certificate, it has to show that there has been a value addition of at least 20 per cent to the good being exported. However, in the case of gold jewellery the value addition was not possible as gold rates in Thailand were at the same level as India and would have pushed up costs rendering such import uncompetitive.
Besides, the country does not manufacture 22 carat gold jewellery. A team of Indian officials had visited Thailand in April to discuss the issue of misuse of rules of origin certificates, the official said adding that importers will have to pay up balance duties, interest at the rate of 18 per cent and also penalty equivalent to the duty amount. These gold importers could be in trouble if the ROO (rules of origin) certificates are found in violation of norms, another government official said.
India, the largest consumer of gold, imported $38 billion worth of yellow metal in 2012-13 that contributed significantly to its record high current account deficit. Current account deficitstood at 6.7 per cent in third quarter of 2012-13 but is expected to be lower at 5 per cent ofGDP in full fiscal.