Explained: Why India Raised Gold Import Duty, And What It Means For You

Gold Import Duty: Days after Prime Minister Narendra Modi urged citizens to avoid buying gold for a year, the government followed through with a hard policy move: it raised the effective import duty on gold and silver from 6 per cent to 15 per cent.

From May 13, gold now attracts 10 per cent Basic Customs Duty (BCD) and 5 per cent Agriculture Infrastructure and Development Cess (AIDC), up from 5 per cent and 1 per cent earlier. The change was notified by the Ministry of Finance under Customs Notification No. 16/2026.  

This is not just a tax tweak. It is a macro-economic signal aimed at saving dollars, cooling gold demand, and protecting India's foreign exchange reserves at a time of global stress due to the ongoing Iran war.

Here's what it changes:-

Notably, the notification also revises duties on jewellery findings and certain industrial inputs, and offers concessional rates (4.35-5 per cent) for recycling/recovery categories like spent catalysts/ash containing precious metals-clearly nudging the industry toward recycling over fresh imports.

Gold, Silver Import Duty Hike: What Triggered The Move

India does not produce gold. Nearly all demand is met through imports, which are paid for in US dollars. 

In 2025-26, gold imports made up 9-10 per cent of India's total import bill. In absolute terms, India paid $71.98 billion (a record) to import gold and meet domestic demand.

However, India's forex reserves have slipped from recent highs amid Middle East tensions and costly crude oil. And the International Monetary Fund (IMF) IMF projects a wider current account deficit (CAD) if the war drags on.

Therefore, India is taking pre-emptive steps to save its forex reserves. The math is simple: less gold buying = fewer dollars leaving India. Even a 30-40 per cent drop in gold imports can save $20-25 billion in a year.

How Will Import Duty Hike Impact Gold Prices 

Gold becomes instantly costlier with this hike. Retail jewellery prices will reflect this quickly.

At the time of filing this report, gold prices in India were around Rs 15,475 per gram for 24K carat, while silver was trading near Rs 278,000-Rs 290,000 per kg.

(This increase is before adding: 3% GST, jeweller margins, and making charges.)

How This Deters Buyers

Gold buying in India is cultural (weddings, festivals) and financial (safe haven). The government is targeting both behaviours:

• Higher prices discourage investment buying
• PM's appeal discourages ceremonial buying
• Recent surge in gold ETFs (per World Gold Council) shows investors had already been shifting to paper gold

What To Expect Now:

• Investors may now shift to gold ETFs/digital gold
• Postponement of jewellery purchases
• Exchange of old gold for new jewellery

Why This Import Duty Hike Helps The Economy

• The move saves forex for essential imports like crude oil (India imports 88 per cent of its oil)
• Narrows CAD, supports the rupee
• Reduces speculative gold hoarding
• Pushes recycling and domestic value chains -- The order's concessional rates for recovery/recycling categories underline this intent  

However, bullion dealers warn the grey market may revive. When duty gaps widen, smuggling becomes profitable. The illegal practise had reduced after tariff cuts in 2024. Now, with a 15 per cent duty:

• Illegal routes via neighbouring countries can re-emerge
• Cash transactions may rise
• Enforcement challenge for customs and DRI
• Industry voices, including leaders from the India Bullion and Jewellers Association, have cautioned about this risk 

Impact On Bullion Traders & Jewellers

This is a direct hit on their business.

• Lower footfalls expected
• Working capital pressure as inventory costs rise
• Jewellery findings now taxed at 5-5.4 per cent
• However, some trader groups have publicly backed the PM's call despite short-term pain
• The industry is split between livelihood concerns and national interest positioning.

This is policy by persuasion and pricing. First, a moral appeal by the Prime Minister. And then, a fiscal barrier by the government. The message is clear: Gold is draining India's dollars. Pause it.