The government has implemented a comprehensive increase in gold import duties, establishing a 10% basic customs duty along with a 5% Agriculture Infrastructure and Development Cess (AIDC) on gold and silver imports. According to reports from Upstox Securities, this dual structure brings the effective import tax to 15% from the previous 6%, representing a significant increase in the cost of gold imports into India. The decision, announced through government orders on Wednesday, combines these rates to create a total effective import tax of 15%, which is expected to have cascading effects across the gold and jewellery industry supply chain. The revised rates have already come into effect from midnight and span across precious metals, jewellery findings and industrial imports, as disclosed in a central government notification.
The duty hike is expected to have substantial implications for gold prices and related sectors, as reported by Upstox Securities. The increased import costs are likely to increase gold prices in the domestic market, making the precious metal more expensive for Indian consumers and potentially affecting demand patterns. The duty structure specifically targets both gold and silver imports, suggesting a broader policy approach to precious metals trade. India meets almost all of its gold consumption through imports, making the metal a significant contributor to the trade deficit. Surendra Mehta, national secretary at the India Bullion and Jewellers Association, acknowledged the government's intent while flagging the consequences. "As expected, the government has raised duties to curb the current account deficit. However, this could affect demand, as gold and silver prices were already elevated," he said. The notification amends the earlier customs notifications issued in 2000, 2018, 2021 and 2025.
Industry experts are raising concerns about potential smuggling activities following the duty increase. A Mumbai-based bullion dealer at a private bank warned that grey markets would likely reactivate given the profit potential at current price levels. "Grey markets are likely to become active, as the incentives to bring in gold illegally are high. At current price levels, smugglers could make significant profits," the dealer said. This concern is particularly relevant as smuggling had eased significantly after India cut gold tariffs in mid-2024, and Wednesday's sharp reversal risks undoing that progress. The smuggling concern is more pointed given that India's Gold imports in financial year 2026 increased to a record $71.98 billion, up 2% from the previous year.
The duty increase represents a significant policy shift in India's precious metals trade framework, as reported by Upstox Securities. The decision follows Prime Minister Narendra Modi's appeal on Sunday, urging Indians to avoid buying gold for a year, a rare public call that emphasised just how seriously the government is treating the pressure on reserves. The policy change comes at a complicated moment for India's gold market, with demand for gold as an investment surging over the past year, driven by a sustained price rally and negative returns from equities. Inflows into India's gold exchange-traded funds jumped 186% year-on-year in the March quarter to a record 20 metric tons, according to the World Gold Council. The government had already been tightening import controls before Wednesday's announcement, with a 3% integrated goods and services tax (IGST) levied on gold and silver imports prompting banks to pause purchases for over a month, pushing April imports to a near 30-year low.
