Key Takeaway:
- Effective duty on gold/silver jumped from 6% to 15% (10% Basic Duty + 5% AIDC).
- The move follows PM Modi’s appeal for citizens to pause gold purchases for one year.
- Gold imports hit a record $72 billion last year, accounting for 10% of India’s total import bill.
India raised the effective import duty on gold and silver from 6% to 15% on Tuesday to curb imports, conserve foreign exchange reserves, and reduce pressure on the rupee amid rising global uncertainty linked to the Iran war.
The Ministry of Finance issued Customs Notification No. 16/2026, increasing the Basic Customs Duty on gold to 10% from 5% and the Agriculture Infrastructure and Development Cess to 5% from 1%.
The move comes days after Prime Minister Narendra Modi urged citizens to avoid buying gold for a year as the government seeks to reduce dollar outflows during heightened geopolitical tensions in the Middle East.
India imports nearly all of its gold demand, making the metal a major contributor to the country’s import bill. In the 2025-26 fiscal year, gold imports reached a record $71.98 billion, accounting for nearly 10% of total imports.
Officials said the higher duty is aimed at reducing non-essential imports and protecting India’s foreign exchange reserves, which have come under pressure from rising crude oil prices and global market volatility.
“The message is clear: reduce gold import duty to preserve forex stability,” a finance ministry official said on condition of anonymity because they were not authorized to speak publicly.
Higher Duties Push Retail Gold Prices Up
The duty increase is expected to immediately raise domestic gold and silver prices, affecting jewellery buyers and investors ahead of the festive and wedding seasons.
At current market prices, the duty on gold valued at Rs 1,54,750 rises to Rs 23,212 under the new structure, compared with Rs 9,285 earlier. The landed cost after duty increases to nearly Rs 1,77,962 before GST, and the making charges are added.
Bullion traders said higher prices could discourage discretionary purchases and shift investors toward alternatives such as gold exchange-traded funds and digital Gold Import Duty products.
“The government is trying to cool physical demand without restricting financial investment products,” said a Mumbai-based bullion analyst.
The notification also reduced duties on certain recycling and recovery categories involving precious metals, signaling a policy push toward domestic recycling instead of fresh imports.
Industry experts said the government expects lower imports to narrow the current account deficit and support the rupee if geopolitical tensions continue.
The International Monetary Fund has warned that prolonged conflict in the Middle East could widen India’s current account deficit because of higher energy costs and import pressures.
Jewellers Warn Of Smuggling And Business Slowdown
Jewellers and bullion dealers warned that sharply higher import duties could revive illegal gold smuggling networks that had weakened after tariff reductions in 2024.
“When the duty gap widens significantly, unofficial channels become profitable again,” said a representative of the India Bullion and Jewellers Association.
Traders said they expect lower showroom footfalls, higher working capital requirements, and slower jewellery sales in the coming months.
Some industry groups, however, publicly backed the government’s decision despite concerns over short-term business losses, describing the move as necessary during a period of economic uncertainty.
Economists said India’s dependence on imported crude oil and gold leaves the country vulnerable during global conflicts, making import management an important policy tool.
India imports nearly 88% of its crude oil requirements, increasing pressure on foreign exchange reserves when global commodity prices rise.
The government has not announced how long the higher duty structure will remain in place.
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