(MENAFN- Live Mint)

New Delhi: The government has tightened export compliance for jewellery manufacturers under the advance authorization scheme, aiming to curb procedural loopholes amid soaring gold imports, a key factor for latest spike in India's trade deficit. The Directorate General of Foreign Trade (DGFT) has aligned export timelines with the Foreign Trade Policy (FTP) 2023, requiring exporters to complete their obligations within 120 days of import and removing any scope for extensions.

The move comes as India's gold imports nearly doubled to $9.6 billion in September from $4.6 billion a month earlier, fuelled by festive demand and speculative buying. India's trade deficit shot up to a 13-month high of $32.15 billion in September largely on account of bullion imports.

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By enforcing watertight deadlines, the DGFT looks to discourage advance stocking, tighten monitoring and ensure that duty-free imports genuinely feed exports in a sector that still brings in nearly $30 billion a year.

The move closes a procedural loophole that allowed exporters to stretch timelines or stock gold imported duty-free, instead of using it for exports. By enforcing fixed deadlines, the government aims to tighten oversight, prevent misuse, and ensure that duty-free imports serve their intended purpose, supporting genuine export production amid record bullion prices and soaring import volumes.

According to the amendment notified by the DGFT, exporters need to fulfil their export obligation within 120 days of the date of import of each consignment against the authorization. For items such as clasps and mountings made of gold, platinum and silver, used in the manufacture and export of jewellery; the period remains 180 days from the date of import.

The revised Para 4.84(b) of the Handbook of Procedures (HBP) 2023 said advance authorization holders may import gold as replenishment after completing their exports. As per the DGFT order, the amendment was introduced to align the Handbook with Para 4.36(a) of the FTP and ensure that both documents carry identical procedural provisions.

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A senior DGFT official in the know said that the earlier phrasing of the rule had caused confusion in implementation and created procedural inconsistencies between the handbook and the trade policy document.“The intent was always clear: export obligations under advance authorization must be completed within 120 or 180 days, depending on the product category. This notification simply removes any ambiguity," the official said.

The timing of the clarification has, however, drawn attention. Latest government data shows India's gold imports rose sharply in September, driven by festive demand and speculative buying, even as global gold and silver prices hit record highs. Gold imports doubled to $9.6 billion in September from $4.6 billion in August. In quantity terms, imports rose to 102 tonnes in September from 61 tonnes in August.

Industry representatives said the clarification will help exporters plan production and shipments more efficiently.“Uniform timelines make compliance easier and reduce the scope for interpretational disputes. Exporters now know exactly when the obligation period starts and ends," said Surendra Mehta, national secretary of India Bullion and Jewellers Association.

The move is also expected to discourage advance stocking of inventory and prevent hoarding of gold, as importers will now be allowed to bring in supplies only after fulfilling their export obligations, Mehta said.

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The advance authorization scheme allows exporters duty-free import of inputs for making products meant exclusively for export. Exporters must fulfil their export obligations within a specified period to prove that the imports were genuinely used for manufacturing export goods.

The gems and jewellery sector, which contributed $29.80 billion to India's exports in FY25, remains one of the largest users of the scheme. Although exports from this labour-intensive sector fell from $32.70 billion in FY24, it remains a major source of employment, providing jobs to around 5 million people.

After a relentless rise to new highs that saw 24-karat gold cross ₹1.27 lakh per 10 grams ahead of Diwali on 18 October, prices of the precious metal took a breather and were at ₹1.22 lakh per 10 grams on 24 October.

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