In May 2022, when then Minister of Commerce Piyush Goyal signed a hastily finalised India-UAE free trade agreement, a line tucked away in the agreement covering 10,000 goods and services hid a golden opportunity for traders, literally.

The opportunity came in the form of a loophole in the trade agreement, allowing bullion dealers to import gold cheaply from the Emirates.

The loophole was a promise to bring down and eventually eliminate customs duty on the platinum alloy imported from the UAE. What’s interesting is how platinum alloy is defined. Anything with 2% platinum by weight is its alloy, which means 98% of the alloy can be gold.

Traders pounced on the loophole to import gold cheaply by masking it as platinum alloy. It allowed them to avoid the high import duty and restrictions on private players to import gold.

How big was the windfall? At one point in time, the import duty on platinum alloy stood at 8.15% as against the effective tax of 18.45% on gold, a difference of 10 percentage points.

The Reporters’ Collective has now estimated, based on data in public domain and internal government records, that this loophole has cost India a whopping Rs 1,700 crore in lost revenue since 2022, leaving the customs officials red-faced.

Platinum alloy worth around Rs 24,000 crore has been imported since May 2022, when the Comprehensive Economic Partnership Agreement with the UAE came into force, shows data. Internal records of tax authorities estimate that more than 90% of this is actually gold.

Previously unpublished internal government data and assessments have shown that the loophole is being widely exploited to import gold, and that the government knew about it.

Alarm bells have gone off in the government over private players importing gold worth around Rs 21,000 crore cloaked as platinum from the UAE to avoid paying duties.

Read the exposé written by The Collective’s newest member Ayushi Kar along with Shreegireesh Jalihal.