Chennai: In order to curb round-tripping, which is rampant with gems and jewellery exports, the trade body has made recommendation to the government to increase value addition rates for different categories.
A section of the trade believes that some of the exporters have been making use of the lower value addition rates for circular trading so that they can inflate their turnover and secure cheaper export credit.
“Export credit is around 6 per cent lower than the domestic rates and even after the expenses on minimal value addition and shipping, these exporters are able to make savings of 4 per cent by making bogus exports,” said an industry insider. These funds are also diverted to other businesses and purposes.
Currently, plain gold jewellery requires a minimum value addition of 3.5 per cent, studded-diamond jewellery 7 per cent, jewellery studded with coloured gemstones 6 per cent, any jewellery manufactured through fully-mechanised process 2 per cent, medallions and gold coins 1.5 per cent and findings and mountings manufactured through mechanised process 2.5 per cent.
Gems and Jewellery Export Promotion Council has proposed to increase the value addition rates of plain gold jewellery, diamond-studded jewellery, coloured gemstone-studded jewellery and any jewellery produced through fully mechanised process. The rates can go up by two per cent or more in each
The government is also expected to bring in certain amendments in Chapter 4 of Foreign Trade Policy, which deals with enforcement and adjudication of policy norms.
Financial Chronicle in the past has extensively written about how different categories are being used for circular trading. This includes medallions and gold coins, crude gold jewellery, crude gold articles, silver jewellery, rough diamonds and cut and polished diamonds imported and re-exported as return consignment.
In 2017, the government had banned export of 24-carat medallions and coins as well as other gold jewellery to curb round-tripping. This saw medallion and gold coin imports coming down to nil in the subsequent months. Now, medallions and coins of 22 carat are getting exported. While converting 24 carat gold into 22 carat articles higher value addition is required and hence the scope of round-tripping is limited....