India is the world's second biggest gold consumer after China.
New Delhi: South Korea has asked India to remove restrictions on gold and silver imports, which were imposed to check abuse of free trade agreement leading to significant surge in the inbound shipments.
In August 2017, India restricted imports of gold and silver items from South Korea to check spurt in the inbound shipments of the precious metals from that country.
"South Korea is asking for removal of these restrictions but we have asked them to increase value addition norms," a government official said.
As part of the restrictions, importers have to obtain a licence from the Directorate General of Foreign Trade (DGFT) for importing gold and silver from South Korea.
The two nations implemented a free trade agreement in January 2010. Under the pact , basic customs duty on gold was eliminated. Further, the 12.5 per cent countervailing duty on gold imports has been subsumed in the Goods and Services Tax (GST).
Accordingly, the imports now attract only 3 per cent integrated GST. On the other hand, imports of gold from non-FTA countries attract 10 per cent customs duty.
Gems and jewellery exporters too have asked not to ease the restrictions as it would impact their shipments. An official of the gems and jewellery export promotion council (GJEPC) said easing of norms would again lead to significant surge in imports of the yellow metal in India from Korea.
"South Korea is not a major player in gems and jewellery sector but despite that certain players were abusing the free trade pact and exporting items to India," the council official said.
After the imposition of restrictions, no importer has sought licence from DGFT for the imports. Gold imports from South Korea has jumped to USD 338.6 million in July 2017. The import in 2016-17 was only USD 70.46 million from that country. India is the world's second biggest gold consumer after China. The imports mainly take care of demand by the jewellery industry.
Both the countries have started the first review of the free trade agreement. A team of senior officials is already there for the meeting.