Gold Import by SEZ units in India

Ashish M. Shaji

21 Nov, 2020

The Central Board of Excise and Customs Directorate General of Export Promotion under the Ministry of Finance, Government of India on 4^th September 2013 notified regarding the procedure to be followed by the agencies for supply of duty-free gold to the exporters. The fresh guidelines were issued after the Board’s circular in the year 2009. The circular issued by it in 2013 shall supersede the one of 2009 in respect of gold import. However, the import of silver and platinum will continue to be governed by the 2009 customs circular. 

Agencies allowed doing gold import into India

The entities notified by the Directorate General of Foreign Trade (DGFT) that will be permitted to import gold as per the RBI circular are as follows-

• Metals and Minerals Trading Corporation Limited;
• Handicraft and handloom Export Corporation;
• Project and Equipment Corporation of India Limited;
• State Trading Corporation;
•  STCL Limited;
• MSTC Limited;
• Gems and Jewellery Export Promotion Council;
• Diamond India Limited;
• A star Trading House (for Gems and Jewellery sector only) or a premier Trading House;
• And any other agency authorized by the RBI (Reserve Bank of India).

Conditions for Gold import into India to be followed by all Entities/Agencies

The import of gold by the aforementioned agencies shall be subject to the following conditions:

• Gold import in the form of coins and medallions is prohibited;
• The entities or SEZ units and Export Oriented Units, Premier and Star Trading Houses will be permitted to import gold exclusively for export purposes. These entities will not be permitted to clear imported gold for any other purpose except for exports, irrespective of whether they are nominated agencies or not;
• All gold import must be routed through customs bonded warehouses;
• Gold imported against any authorization like Advance authorization/Duty-Free Import Authorization must be used for only export purposes, and there shall be no diversion for domestic use;
•   Import of gold dore bars shall be allowed only against a license issued by the Directorate General of Foreign Trade;
• Entities or units in SEZ and EOUs Premier and Star Trading Houses shall be permitted to procure gold from the refinery of the license holder exclusively for export purposes, and these entities will not be permitted to clear imported gold for any other purpose except for exports;
•  For each consignment of imported gold bars, the license holder must submit a report on its use, gold produced after refining, and gold issued to exporters and the proof regarding the export for goods manufactured and exported by the exporters to the central excise officer.

Procedure for Gold Import

The prescribed procedure for import of gold is as follows-

• All gold import must be routed through customs bonded warehouses;
• The Jurisdictional Commissioner can permit the vaults of the nominated agencies as customs bonded warehouses subject to the procedure under section 58 of the customs Act;
• For every consignment of imported gold, at least 20% quantity shall be for supply to the exporters and the remaining can be cleared on payment of duty according to the RBI circular 2013, as revised;
• The nominated agencies are required to furnish a bond to the satisfaction of the officer undertaking to properly account for the warehouse gold and also to discharge the duty liability at a prescribed effective rate of duty;
• The agencies may be permitted by the jurisdictional Commissioner of customs to provide a general bond for an estimated amount of duty worked out at the effective rate involved in their monthly import or a revolving bond beginning with a bond equal to the duty estimated at an effective rate on the quantity of gold likely to be imported in a month;
• The nominated agencies shall also furnish a bank guarantee equal to 25% of the estimated amount of duty involved in the import of gold in a month or the bonds executed by them. Exemption shall be permissible only on the following conditions:
  • Such an entity has not defaulted in adhering to the procedure and conditions specified by Customs or DGFT;
  • Such entity has not defaulted in payment of duty within the prescribed period in case of default in the export of jewellery manufactured out of precious metal supplied by the nominated agency within the specified period;
  • Such entity hasn’t been served with a show-cause notice, or no demand confirmed against it during the preceding three years for violations involving fraud or any misstatement or suppression of facts under Customs Act 1962, Central Excise Act 1944, Prevention of Money Laundering Act 2002, the Foreign Trade Act, 1992, the Foreign Exchange Management Act, 1999 and rules made thereunder.
• The Commissioner of Customs may permit more than one nominated agencies to store their imported goods in the same bonded warehouse provided the quantities are kept segregated, and separate accounts are maintained;
•  The nominated agencies shall be exempted from the double lock system. Physical presence will not be required for bonding or ex-bonding the goods and the nominated agencies won’t require to pay cost recovery charges;
• The nominated agencies or entities may be visited by the custom officers for surprise audits or checks. The  jurisdictional Commissioner is required to devise a system of random audit once in three months during the first year and twice in a year subsequently;
• The nominated agencies seeking to clear gold to an exporter shall file an ex bond bill of entry stating the details of the owners/promoters/partners/Managing Director Etc. of the exporters to whom the gold is sold along with the jurisdictional customs officer where the gold has been bonded;
• The exporters seeking to receive precious metal form the agencies or entities will register themselves with their jurisdictional deputy or assistant commissioners who shall issue them a one-time certificate mentioning the details of their units. The exporters who are already registered with the customs authorities need not take a fresh registration under this circular. This certificate must be presented to the nominated agencies while taking gold. The units are required to submit an undertaking to the Deputy/Assistant Commissioner without a bank guarantee to follow the conditions of notifications under which they receive duty-free gold and export the jewellery within the period stipulated in the Foreign Trade Policy. The same procedure shall be followed by the EOUs and SEZ units intending to receive gold from the entities or agencies;
• The customs officer will permit clearance of gold once the documents are submitted, and he shall make necessary entries in the register;
• The agencies or the entities shall also make an account of goods released to the exporters on a daily basis;
• Proof of the export by the exporter will be furnished to the nominated agencies, and the agency shall furnish a self-certified copy of the same to the customs office where the gold was bonded;
• If the proof of export is not produced then the agency or the entity shall deposit the amount of duty calculated at the effective rate leviable on the quantity of the precious metal not exported within seven days of the expiry of the period within which it was supposed to be exported;
• The customs officer shall ensure that all clearances of gold are in accordance with the RBI circular, and the reconciliation of exports and calculation of quantities for subsequent imports will be done agency wise and port wise by the jurisdictional customs officer.

Procedure for Import of precious goods (Gold, silver, platinum or gems and Jewellery) by SEZ

Under Rule 29(5) of the SEZ Rules, the SEZ may import precious goods (Gold, silver, platinum or gems and Jewellery) as personal baggage through an authorized passenger in the following way-

• Such authorized passenger bringing the goods must declare it with the customs at the airport/port arrival halls in the declaration form  and hand over the goods and packing list to the customs authorities;
• The customs officer shall detain the goods  and shall issue detention receipt;
• The importer shall file BOE online and submit the original BOE to AO for assessment;
• The authorized representative shall present assessed BOE and the original detention receipt at the detention counter;
• After release, the goods may be moved to SEZ importer or may be handed over to the custodial or authorized representative of SEZ after sealing the parcel with customs seal;
• The goods shall be allowed to be taken after verification by AO.

Conclusion

The SEZ units have a benefit of zero gold import duty; therefore, they are able to increase gold jewellery export phenomenally. The import of gold in DTA attracts 10% customs duty, and additionally, the exporter and jewellery manufactures have to pay GST as well. However, jewellery exported from DTA is non-competitive, whereas jewellery exported from SEZ shall withstand international competition because of its zero duty structure.