India Imposes Strict Restrictions on Silver Jewellery Imports to Curb Trade Loopholes

New Delhi: In a significant move to safeguard its domestic jewellery sector and prevent the misuse of Free Trade Agreements (FTAs), the Directorate General of Foreign Trade (DGFT) has imposed immediate restrictions on the import of certain categories of silver jewellery. The decision comes in response to an alarming, multi-fold surge in the import of plain silver jewellery, with the overwhelming bulk originating from Thailand.

The DGFT’s notification, issued recently, amends the import policy for specific Harmonised System (HS) codes covering articles of plain silver jewellery, shifting their status from ‘Free’ to ‘Restricted’ with immediate effect. These restrictions will remain in force until March 31, 2026. This change now mandates that importers must obtain a valid import authorisation or license from the DGFT to bring these items into the country.

The Surge and Suspected Misuse

The primary catalyst for this action is the steep and unusual spike in silver jewellery imports, particularly from Thailand, a member of the Association of Southeast Asian Nations (ASEAN) with which India has an FTA. Trade data analysis revealed that silver jewellery imports soared by over 270% in the April-June quarter of the current financial year compared to the same period the previous year.

The surge was particularly pronounced from Thailand, which is not a major silver-producing nation. Imports of silver jewellery from Thailand reportedly increased by hundreds of per cent during this period, raising serious red flags for the Commerce Ministry. Officials suggested that this massive inflow was a case of duty circumvention, with high-purity silver being imported in the guise of finished or unstudded jewellery to exploit the zero or preferential duty benefits available under the ASEAN-India Trade in Goods Agreement (AITIGA). Once in India, the imported ‘ornaments’ are allegedly melted down and converted into silver bars, thereby evading the higher Basic Customs Duty applicable to silver bar imports.

Protecting Domestic Industry and Livelihoods

The government has explicitly stated that the restrictions are a defensive measure to provide a level playing field for domestic manufacturers. Unchecked imports that circumvent FTA provisions were reportedly adversely affecting local silver jewellery producers, many of whom are small and medium-sized enterprises (SMEs).

A senior official noted that the surge in imports was threatening employment within the labour-intensive Indian jewellery sector. By requiring an import license, the DGFT aims to distinguish between genuine trade and transactions designed purely for duty arbitrage. The timing is also strategic, preceding the country’s peak festival and wedding seasons, when demand for silver ornaments is traditionally at its highest. The restriction is expected to allow domestic manufacturers to capitalise on this seasonal demand without facing unfair price undercutting from duty-evading imports.

Framework for Genuine Trade

While the policy is now restricted, the DGFT has clarified that the move is not intended to halt legitimate business. The new framework is designed to allow genuine, compliant trade to continue through the licensing mechanism, while effectively plugging the loopholes that allowed for the large-scale, unregulated entry of silver under the guise of jewellery.

This regulatory tightening on silver jewellery follows similar actions taken by the government in the past to prevent the misuse of trade agreements for the duty-free import of other precious metals like gold. The DGFT’s decision underscores a broader governmental effort to enhance transparency and security in the bullion and precious metals trade flows across the country.