Just a few days ago, the Indian Prime Minister publicly made several appeals to Indian citizens, of all of them, the most pronounced was to refrain from purchasing gold for a year. The government has not doubled down on this request with an official policy to back the request. Import duty on precious metals, gold and silver has increased from 6% to 15%.
As of the 13th of May, the yellow metal will now bear a 10% Basic Customs Duty (BCD) and an additional 5% Agriculture Infrastructure and Development Cess (AIDC). These taxes have increased by 5% and 4% compared to earlier rates.
Taxation Name (Type) | Old Duty | New Duty | Duty Difference (Increase) |
Basic Customs Duty | 5% | 10% | 5% |
AIDC | 1% | 5% | 4% |
Effective Import Duty | 6% | 15% | 9% |
This isn’t a retaliatory tariff or a tax haul; it’s a broader scheme to conserve foreign currency at a time when foreign exchange reserves are under immense strain due to the ongoing war in Iran and other geopolitical challenges.
Why Has the Gold and Silver Import Duty Increased?
India is the 2nd largest consumer of precious metals, including gold and silver.
However, just about all of this demand is met by importing gold from other countries, all of which is paid for in US dollars.
Last year (2025-2026), gold imports accounted for roughly 10% of India’s entire import bill. This usually wouldn’t be an issue, but costly crude oil imports (due to the tensions in the Middle East) have widened the deficit in the Current Account Deficit (CAD), which the International Monetary Fund (IMF) suspects will only widen further.
India’s gold duty increase is a precautionary measure to conserve its remaining forex reserves. The aim is to reduce gold demand and lower the amount of US dollars leaving the country.
How Gold Import Duty Will Affect Gold Prices
Obviously these duty hikes will make gold more expensive and this will be immediately visible in retail jewellery prices. Currently, gold is trading at around 1,62,000 per 10 grams and silver at 3,10,000 per kg.
Apart from the duty increases, a 3% GST charge is levied on making charges, adding to the woes of consumers.
How This Affects You
Although culturally and financially relevant, the Indian government has made it more difficult for people to buy gold for weddings, festivals, and as an investment.
Indians will need to seek an alternative investment option (at least for a year).
Ceremonial gold buying will reduce or consist of alternative jewellery options.
Ready-made fine jewellery will become costlier.
Alternative Options for Consumers to Tackle High Gold Prices
People seeking to bypass and not feel the pinch of the gold duty hike can use the following tips:
The safer and more accessible option is gold ETF purchasing.
Exchanging old gold is a feasible and beneficial alternative.
Postpone any plans to buy gold bullion for investment.
Explore jewellery with a lower gold percentage, like 9Kt gold jewellery.
Potential Risks of the Gold Duty Hike
Although these hikes have the country's best interests at heart, experts have sounded the alarm about potential risks. Dealers warn that there could be a revival of the gold grey market, a smuggling ring that had been stopped after the 2024 gold tariff cuts.
The following issues could arise due to the rising gold prices caused by gold duty hikes:
Gold transactions will be done completely using cash
Unethical and illegal gold smuggling via the surrounding countries
Challenges for customs and the Directorate of Revenue Intelligence (DRI) to track gold imports and smuggling
Impact on Jewellery Shops and Bullion Traders
The first to feel the impact of the new 15% gold import duty will be jewellery shops and dealers of bullion. Their businesses will feel the following effects:
Investment risks as inventory costs skyrocket
Greater pressure on each business decision
Jewellery findings now carry a 5% to 5.4% tax
Greater Economic Impact
The country is divided by the swift action of the Indian government as concerns of livelihood are pitted against national interest. While some major traders have backed the Prime Minister, others remain sceptical over the broader effects of this ban and whether the ‘short-term’ hike will have the desired outcome.