India’s Silver Import Curbs Aim to Plug UAE Duty Arbitrage

India has restricted silver imports to prevent possible routing of cheap imports through Dubai. The move follows the May 12 increase in import duty from 6% to 15%, which created an 8% tariff advantage under India’s free-trade agreement with the UAE.

On May 16, India’s Directorate General of Foreign Trade placed silver imports under the “restricted” category, meaning importers will now require government licences to bring silver into the country. The move came just four days after New Delhi, on May 12, sharply increased import duties on gold and silver from 6% to 15%.

The restrictions are aimed at preventing a potential surge in low-duty silver imports routed through the UAE under the India-UAE Comprehensive Economic Partnership Agreement.

Under the India-UAE CEPA, which came into force on May 1, 2022, India agreed to gradually reduce tariffs on silver imports from the UAE from 10% to zero over a ten-year period ending in 2031. The concessional tariff on silver imports from the UAE currently stands at 7%.

Before May 12, India’s regular most-favored-nation tariff on silver was 6%, making imports routed through Dubai commercially unattractive. But the government’s decision on May 12 to raise the standard tariff to 15% widened the gap between the normal duty and the UAE concessional rate to eight percentage points, creating a strong incentive for traders to reroute global silver shipments through Dubai.

Officials fear the widening tariff gap could trigger large-scale arbitrage-driven imports from the UAE.

The new licensing requirement is expected to give the government tighter control over the quantity and timing of silver imports while still allowing duty-free imports for export-oriented industries.

The restrictions will not apply to imports by 100% Export Oriented Units, Special Economic Zones, or firms importing silver under export-promotion schemes such as Advance Authorisation for use in export products like jewellery.

Gold, despite being far more valuable, has not been moved to the restricted list. This is because the tariff advantage on gold imports from the UAE is far smaller — around 1% under a tariff-rate quota system — limiting the scope for large arbitrage gains.