Gold and gold jewellery exporters say they are willing to pay import duties in India themselves, which would allow more shipments from Thailand as well as help to cut the subcontinent's ballooning trade deficit.
"It's a pity that India is suffering so heavily from a massive trade deficit that it must take stringent action to control imports from all over the the world, not just from Thailand," said Somchai Phornchindarak, president of the Thai Gem and Jewelry Traders Association.
"The private sectors in Thailand and India have discussed this issue in depth, and we've agreed to pay the import taxes ourselves on gold and gold jewellery shipped there so that shipment levels can return to normal."
He said India has not allowed Thai gold and gold jewellery imports to enjoy import tax exemptions laid out under the early-harvest scheme of a bilateral free trade agreement (FTA).
Thai authorities deny allegations that some Thai traders have subrogated import rights from third countries where gold prices are low.
Negotiations broke down amid the Indian Finance Ministry's refusal to believe certificates of origin from Thailand are valid.
The issue was raised again during a recent meeting between Indian Commerce and Industry Minister Anand Sharma and Thai Deputy Prime Minister and Commerce Minister Niwatthamrong Bunsongphaisan in New Delhi.
"We have a special allowance under the FTA that eliminates tax on our gold shipments to India. But now we've agreed to pay the duty ourselves," Mr Niwatthamrong told Indian media on Wednesday.
India has imposed general restrictions on gold imports to address its rising current account deficit, which now stands at 4.8% of gross domestic product.
Early this year, it stopped the concession on gold imports from Thailand laid out under the early-harvest scheme, which kicked in late last year, saying Thai exporters had yet to prove their gold originated from Thailand and not from a third country.
The early-harvest scheme, signed by India and Thailand in 2004, allows imports of gold jewellery at a concessional duty of 1% against regular duty of 10%.
Last year, Thailand exported US$13.1 billion worth of gold and gold jewellery to India. In the first eight months of 2013, shipments fell by 5.78% year-on-year to $6.68 billion.