Trade body red flags Yes Bank silver imports under UAE deal

“It has come to our notice that the customs department has cleared (a) consignment of Yes Bank of silver import under UAE-CEPA agreement at 4% basic duty+5% AIDC, thereby totalling to 9%,” says a letter signed by Surendra Mehta, national secretary of India Bullion and Jewellers Association (IBJA) addressed to Sanjay Malhotra, revenue secretary, department of revenue. “The normal rate of duty on silver as amended as vide Budget 2023 is 10% basic duty+5% AIDC totalling to 15%,” the letter said.

IBJA believes the duty differential can cause price distortion in the market as other banks are importing silver at 15% and not necessarily under CEPA. Mint has reviewed the IBJA letter.

CEPA stands for Comprehensive Economic Partnership Agreement while AIDC is agriculture and infrastructure development cess. The treaty is to promote bilateral trade and ease of doing business between the two countries and was signed in February 2022.

Mehta said that while fixing the duty on gold under UAE-CEPA agreement, it was fixed at 1% lower than the normal duty in the year 2022 , when the duty on gold was 10%.

But, for silver, which was 10% , the CEPA duty was fixed at 9.5% for 2022 , 9% for 2023 , 8% for 2024 and 7% for 2025 and so on.

However, in Budget 2023, the normal duty on silver was increased from 10% to 15% but duty in the CEPA agreement was not revised. Due to this, currently an entity can import silver under the agreement at 9% against a normal duty of 15%.

“The duty under CEPA should be revised to 14% to prevent market distortion. If it is left as it is then when normal duty is decreased, it would result in CEPA being higher than the normal duty, negating the raison d’être for the agreement,” Mehta explained.

IBJA has also requested the revenue department to charge the differential duty to Yes Bank in the interest of an orderly market.

A query to Yes Bank went unanswered.

Other leading banks that import precious metals on consignment basis include HDFC Bank, ICICI Bank, Kotak Bank and RBL Bank and Yes Bank, said Mehta, adding that of these, Yes Bank was an active importer of silver under CEPA.

IBJA has also requested the revenue department to charge the differential duty to Yes Bank in the interest of an orderly market.

India imported 6,000-6,500 tonnes of silver before the pandemic. After covid-19, silver imports fell to about 2,500 tonnes in 2020 and 2021, resulting in excessive inventory drawdowns, said Debajit Saha, lead analyst at Refinitiv Metals. In 2022, imports jumped to over 8,000 tonnes as traders restocked inventory and some invested in the metal to benefit from price rise.

Thanks to CEPA, bilateral trade between India and the UAE touched historic highs during FY23. Trade increased from $72.9 billion in FY22 to $84.5 billion in FY23 , posting a 16% year-on-year increase.

Updated: 30 Jul 2023, 11:13 PM IST