Why in news?
The Indian government recently capped duty‑free gold imports under the Advance Authorisation (AA) Scheme at 100 kilograms. The decision came shortly after basic customs duty on gold was increased to 15 percent. Authorities introduced the cap to prevent misuse of the scheme, under which exporters import duty‑free gold for jewellery manufacture before re‑exporting finished products.
Background
The AA Scheme allows manufacturers to import inputs duty‑free on the condition that the finished goods are exported. Historically, exporters could bring in unlimited quantities of gold if they exported jewellery of equivalent value. After the recent hike in import duties, some traders reportedly misused the scheme by importing large quantities of gold and selling part of it domestically, taking advantage of price differentials.
Key provisions of the new cap
- Quantity limit: Each exporter can import up to 100 kilograms of gold duty‑free under the AA Scheme. Imports beyond this limit will attract the standard customs duty.
- Enhanced scrutiny: First‑time applicants for advance authorisation will undergo mandatory physical inspection of their manufacturing facilities to ensure capacity and compliance.
- Performance reporting: Exporters must furnish fortnightly statements on imports, exports and stocks, enabling authorities to monitor utilisation and prevent diversion.
- Intent: The measures aim to curb arbitrage and revenue loss while still supporting genuine jewellery exporters who create value‑added products for foreign markets.
Conclusion
By capping duty‑free imports and tightening oversight, the government seeks to strike a balance between facilitating exports and protecting revenue. Complying with these rules will be essential for exporters to continue benefiting from the AA Scheme.