India Increases Import Duty on Gold and Silver
India has significantly increased the effective import duty on gold and silver to approximately 15%, a measure implemented to curb the nation's rising appetite for precious metals and manage its overall import bill. The new rates, which came into effect on May 13, 2026, mark a substantial intervention in the bullion market.
Why the Duty Hike?
The government's decision stems from a sharp rise in bullion imports, which have become a major component of India's merchandise import expenditure. According to the Department of Economic Affairs' Monthly Economic Review for May 2026, India imported gold and silver worth an alarming $84 billion in the fiscal year 2026 (FY26). This figure represented 10.8% of the country's total merchandise imports, highlighting the growing pressure on trade dynamics.
Officials stated the objective is to discourage discretionary demand for imported precious metals through clear price signals. The surge in imports occurred despite elevated global prices for gold and silver, which increased by 46.7% and 135.4% respectively year-on-year in April 2026.
Details of the New Duty Structure
Under the revised framework, the Basic Customs Duty (BCD) on gold, silver, and platinum was raised from 5% to 10%. Additionally, the Agriculture Infrastructure and Development Cess (AIDC) was also increased. These combined adjustments resulted in the effective import duty on gold and silver climbing to around 15%.
Beyond the duty increase, the government has also tightened import regulations for silver. Imports of silver under specific Harmonised System (HS) codes have been reclassified from the 'free' category to the 'restricted' category, indicating a more cautious regulatory stance towards precious metal inflows.
Impact on Demand and Trade
Early industry estimates suggest the higher duty may already be affecting demand. The India Bullion & Jewellers Association (IBJA) reported a significant decline in gold demand, falling to approximately 7.5 tonnes in the fortnight ending May 27, 2026. This represents a nearly 70% drop compared to roughly 25 tonnes during the same period last year.
"Reports trickling in from jewellers across India show that there has been a 70% drop in demand after the import duty was hiked," said Surendra Mehta, National Secretary of IBJA.
The unorganised sector, which forms a large segment of India's gold trade, has reportedly been among the worst affected by the policy change.
Looking Ahead
Whether this duty hike leads to a sustained moderation in gold and silver imports and a corresponding easing of pressure on India's trade deficit will become clearer in the coming months. For now, the government's move represents one of the most significant recent interventions aimed at managing import composition and influencing consumer demand for non-essential goods.