The government's 15% import duty hike has triggered a significant surge in gold smuggling, with illicitly imported gold now available at discounts of up to ₹10 lakh per kilogram compared to domestic market prices. According to industry participants cited by The Economic Times, gold brought into the country through unofficial routes is currently available at a discount of ₹8-10 lakh per kilogram when compared to current domestic market prices. Much of this gold is reportedly sourced from the Middle East and carried into the country by passengers arriving from Gulf nations without being declared at airports. India Bullion & Jewellers Association national secretary Surendra Mehta confirmed that a significant portion of such gold is brought in by travellers who wear the jewellery and pass through airport green channels.
The current duty structure has created substantial financial incentives for smuggling operations. A bullion dealer from Mumbai's Zaveri Bazar explained that the landed cost of one kilogram of gold is around ₹1.65 crore after accounting for the 15% import duty and 3% goods and services tax. The gold itself is valued at approximately ₹1.40 crore, while taxes account for the remaining ₹25 lakh. When smuggled through grey routes and sold to jewellers or bullion dealers, sellers immediately make a gain of ₹25 lakh per kilogram. As reported by The Economic Times, sellers offer the gold at a discount of ₹8-9 lakh per kilogram and generate a profit of ₹16 lakh per kilogram.
Market observers warn that the current situation mirrors developments after the 2013 duty hike, when unofficial gold imports rose seven-fold within a year. According to the World Gold Council, unofficial imports climbed from about 10 tonnes in the first quarter of 2013 to 70 tonnes by the first quarter of 2014 following a 4% duty increase. The World Gold Council noted that even when duties remained unchanged at 10% from the second half of 2013 to the second quarter of 2019, unofficial inflows stayed elevated, averaging 34 tonnes per quarter. Traders identified Bangladesh and Nepal as other sources of smuggled gold, with such activity largely concentrated in Maharashtra, Tamil Nadu, Gujarat and West Bengal.
The smuggling issue was highlighted last week when customs officials at Mumbai's Chhatrapati Shivaji Maharaj International Airport seized smuggled gold valued at more than ₹4.19 crore from two passengers who had arrived from Dubai. Industry experts noted that it is still too early to estimate the scale of smuggling this financial year, given that the duty increase from 6% to 15% was implemented only weeks ago. The government introduced the measure amid a weakening rupee, elevated crude oil prices and geopolitical tensions while also tightening certain import rules. India consumes about 800-850 tonnes of gold annually, with gold of 999 purity trading at approximately ₹1.57 lakh per 10 grams in Mumbai's spot market.
