The central government has significantly increased customs duty on gold and silver imports to 15% from the previous 6%, taking effect from midnight. According to reports from The Economic Times, the government has imposed a 10% basic customs duty and a 5% Agriculture Infrastructure and Development Cess (AIDC) on gold and silver imports, creating an effective import tax of 15%. Platinum and related precious metal components such as hooks, clasps, clamps, pins and screw backs used in manufacturing will also attract a 10% duty. As per Kedia Advisory, the revised structure includes a 10% basic customs duty along with a 5% Agricultural Infrastructure and Development Cess (AIDC), significantly increasing the effective import tax burden. This marks a return to the 15% duty level that was previously implemented in 2022 before being reduced to 6% in the 2024-25 Budget to boost the domestic gems and jewellery industry.
The Gem and Jewellery Export Promotion Council (GJEPC) has strongly criticized the government's decision, calling it a 'retrograde step' that undermines competitiveness at a critical time. According to The Hindu BusinessLine, GJEPC pointed out that hiking import duties has historically failed to meaningfully curb gold imports, stating that "despite gold prices doubling recently, imports have not declined proportionally. Such measures often fuel smuggling and escalate export costs." The industry body warned that exporters now face Bank Guarantees of ₹28-30 lakhs per kg of duty-free gold from Nominated Agencies, severely blocking working capital and stifling exports. Sachin Sawrikar from Artha Bharat Investment Managers echoed similar concerns, stating that "India's appetite for precious metals is structural, not cyclical; it is woven into savings culture, festive demand, and portfolio behaviour across hundreds of millions of households."
The most severe impact will be felt by MSME manufacturers, who account for 80% of GJEPC's membership, who are currently facing a critical liquidity crunch. According to The Hindu BusinessLine, GJEPC has proposed several industry-led measures to reduce import dependence and promote self-reliance, including promoting lower-carat jewellery such as 18K and 14K products, encouraging consumers to exchange old gold for new jewellery, reviving the Gold Monetisation Scheme (GMS) in a more viable format, and discouraging investment demand for gold bars, billets and coins. The council noted that investment in gold bars, billets and coins currently accounts for nearly 20-30% of total gold imports, and promoting lower-carat jewellery could potentially reduce gold imports by 20-30%. GJEPC also sought special incentives for gold jewellery exporters to help the sector earn foreign exchange amid ongoing global economic uncertainty.
The move aims to curb demand, narrow the trade deficit, and support the rupee, one of Asia's weakest-performing currencies. According to The Economic Times, India has been trying to curb gold imports in recent weeks and began levying a 3% integrated goods and services tax (IGST) on gold and silver imports, prompting banks to halt imports for more than a month. As a result, April imports fell to a near 30-year low. Industry estimates suggest an increase in duty could lead to a decline in gold import volumes by approximately 10-12%, which would help narrow the trade deficit and support the rupee. The precious metal accounts for over 9% of India's total imports, with India's imports in 2025-26 reaching $775 billion. The rise in imports has pushed the country's trade deficit to $333.2 billion during 2025-26, while India's current account deficit rose to $13.2 billion or 1.3% of GDP in the December quarter from $11.3 billion in the year-ago period.
Sawrikar from Artha Bharat Investment Managers warned that "the steep increase in import duties may ultimately strengthen grey-market activity rather than reduce India's appetite for precious metals." He pointed to the sharp rise in gold smuggling following the 2013 duty hikes and warned that any expected savings in foreign exchange reserves may prove "largely illusory." The move comes days after Prime Minister Narendra Modi urged citizens to reduce fuel consumption, use public transport, avoid foreign travel and refrain from purchasing gold for one year. According to Kedia Advisory, the government's overarching message is not against owning gold, but rather aimed at curbing excessive new imports during a critical macroeconomic phase. Industry estimates indicate that around 50% of India's jewellery demand is currently met through the exchange and recycling of old gold, highlighting a gradual shift away from new bullion imports towards reuse.
On Tuesday, 12 May, MCX gold and silver witnessed significant fluctuations, initially rising before dropping in the afternoon due to a recovering dollar, with gold trading at approximately ₹1,53,200 per 10 grams and silver at around ₹2,74,000 per kg. According to Anuj Gupta, MCX gold prices may rise to ₹1.68 lakh to ₹1.70 lakh per 10 grams, while silver prices may hit the ₹3 lakh per kg level. Ponmudi R, CEO of Enrich Money, noted that for MCX Gold, immediate resistance is seen in the ₹1,54,750–₹1,55,000 zone, with a sustained move above this potentially pushing prices towards ₹1,55,500–₹1,56,000. For MCX Silver, immediate resistance lies at ₹2,84,000–₹2,85,000, and a breakout above this level could extend the rally towards ₹2,87,000–₹2,90,000.
