What Happened
- The government, through the Directorate General of Foreign Trade (DGFT), reclassified imports of gold, silver, and platinum jewellery from 'Free' to 'Restricted' under customs tariff heading (CTH) 7113, requiring importers to obtain prior approval or a licence.
- The move targets the systematic misuse of India's Free Trade Agreements (FTAs), particularly the India-ASEAN FTA, through which traders were importing minimally processed precious metal articles at zero or near-zero duty.
- Silver jewellery imports from Thailand alone saw a tenfold increase — from 4 metric tonnes to 40 metric tonnes — with Thailand's share of India's silver jewellery imports rising from 78% to 98%.
- Duty-free gold was also found to be entering India through the HSN code 71131922 (gold jewellery, unstudded) at zero duty from Thailand, whereas standard gold import duty in India is 6-10%.
- Exemptions apply for Export-Oriented Units (EOUs) and Special Economic Zone (SEZ) units, which import raw materials for value-added re-export.
- Earlier, in late 2025, restrictions on silver and platinum jewellery were imposed separately; the April 2026 order consolidates and extends these into a comprehensive policy covering all three precious metals.
Static Topic Bridges
Free Trade Agreements (FTAs) and the Problem of Rules of Origin
An FTA is a treaty between two or more countries that reduces or eliminates tariffs, quotas, and other trade barriers. India has FTAs with ASEAN (2010, goods), Sri Lanka (1998), South Korea (CEPA, 2010), Japan (CEPA, 2011), UAE (CEPA, 2022), and Australia (ECTA, 2023). The India-ASEAN Free Trade Agreement in Goods came into force in January 2010 and progressively eliminated tariffs on most goods traded between India and the 10 ASEAN nations. A critical safeguard in all FTAs is the Rules of Origin (RoO) — provisions specifying the minimum value addition or processing required in the exporting country for goods to qualify for preferential duties. When RoO are weak or poorly enforced, traders exploit the differential between FTA rates and standard MFN (Most Favoured Nation) tariffs through tariff engineering or transshipment.
- India-ASEAN FTA (goods): Signed in 2009, in force from January 2010; covers India and Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam.
- Under the FTA, unstudded jewellery of gold/silver (CTH 7113) attracted zero or very low duty from ASEAN nations, vs. India's MFN gold import duty of 6-15%.
- Total gold import duty components: Basic Customs Duty (6%) + Agriculture Infrastructure Development Cess (2.5%) = effective rate of ~6% on gold bars; jewellery imports at concessional rates can save traders 6-12 percentage points.
- Rules of Origin under India-ASEAN FTA require a minimum of 35% value addition in the exporting country — but for minimally processed silver (melted and shaped), traders were claiming this threshold was met.
- India's overall import of 'made-up jewellery' (finished and semi-finished) surged from $400 million pre-FTA to $2.7 billion in 2024.
Connection to this news: The DGFT restriction on jewellery imports under CTH 7113 is a direct policy response to systematic Rules of Origin abuse — the reclassification to 'Restricted' effectively makes every import subject to individual scrutiny rather than automatic FTA benefit.
DGFT and India's Import Policy Framework
The Directorate General of Foreign Trade (DGFT), under the Ministry of Commerce and Industry, is the principal regulatory authority administering India's Foreign Trade Policy (FTP). Under the FTP, all goods are classified into three import categories: 'Free' (no licence required), 'Restricted' (licence/approval required from DGFT), and 'Prohibited' (cannot be imported). The Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act) is the primary legislative authority for the FTP. Any change in import classification — as done here for jewellery — is notified through DGFT notifications under this Act.
- DGFT operates under the Foreign Trade (Development and Regulation) Act, 1992, as amended by the Foreign Trade (Development and Regulation) Amendment Act, 2010.
- The current Foreign Trade Policy (FTP 2023) was released on April 1, 2023, and replaced the FTP 2015-20 (extended to 2023 due to COVID-19).
- Restricted items require an Import Licence (IL) or other specific authorisation from DGFT before import can proceed; violation is punishable under FTDR Act.
- Export-Oriented Units (EOUs) and Special Economic Zone (SEZ) units are exempt because they import inputs duty-free for export manufacturing — there is no domestic market impact.
- Customs tariff heading (CTH) 7113 covers 'Articles of jewellery and parts thereof, of precious metal or of metal clad with precious metal'.
Connection to this news: By changing the classification from 'Free' to 'Restricted', DGFT has activated the licensing mechanism, meaning every importer of gold/silver/platinum jewellery must now seek prior approval — effectively creating a choke-point to prevent the FTA arbitrage.
India's Gold Import Economy and Trade Policy
India is the world's second-largest consumer of gold (after China), primarily driven by jewellery demand and investment. Gold imports constitute one of the largest components of India's trade deficit — approximately $45-50 billion annually in recent years. India's gold import policy has been a recurring instrument of current account management: when the current account deficit (CAD) widens, the government typically increases import duties or imposes quantitative restrictions. In 2013, India raised gold import duty to 10% and introduced the '80:20 rule' (mandating 20% of imported gold to be re-exported as jewellery). The FTA misuse dynamic adds a new dimension — third-country transshipment uses preferential trade architecture to circumvent these macroeconomic safeguards.
- India's gold demand: ~750-900 tonnes per year (second globally after China).
- Gold import duty: Basic Customs Duty (BCD) was reduced from 15% to 6% on gold bars/bullion in Budget 2024-25 (July 2024 budget), while jewellery remained at higher rates.
- Current Account Deficit (CAD): India's CAD widened to ~$23.9 billion in Q2 FY 2024-25, partly due to high gold imports.
- Import of gold jewellery from Thailand via FTA at zero duty vs. standard rates created effective duty evasion of 6-12% — a margin large enough to fund transshipment logistics profitably.
- India's domestic gems and jewellery sector employs ~4.64 million people and exports ~$32 billion per year (FY 2023-24); unfair imports directly undercut domestic manufacturers.
Connection to this news: The restriction directly protects India's domestic gems and jewellery manufacturing sector — one of the country's largest employment-generating industries — from unfair competition enabled by FTA tariff arbitrage.
Key Facts & Data
- CTH 7113: Customs tariff heading reclassified from 'Free' to 'Restricted' (effective April 2026)
- Silver jewellery imports from Thailand: Rose from 4 metric tonnes to 40 metric tonnes (10x surge); Thailand's share climbed from 78% to 98%
- Gold jewellery imports under HSN 71131922: Zero duty from Thailand under ASEAN FTA vs. 6-15% MFN rate
- India-ASEAN FTA: In force since January 2010; covers 10 ASEAN nations; minimum 35% value addition required for RoO compliance
- Total made-up jewellery imports: Surged from $400 million (pre-FTA) to $2.7 billion (2024)
- India's annual gold demand: ~750-900 tonnes (2nd largest globally)
- India's gold import duty (bullion): 6% BCD (post-July 2024 budget cut); jewellery rates remained higher
- Gems and jewellery sector employment: ~4.64 million; annual exports ~$32 billion (FY 2023-24)
- DGFT authority: Foreign Trade (Development and Regulation) Act, 1992; current FTP: FTP 2023 (effective April 1, 2023)