Gold Tariff Debate Reignites as Government Considers 15% Duty Regime

India Reinstates 15 Percent Customs Duties on Gold and Silver

The Indian government's decision to reintroduce 15 percent customs duties on gold and silver has reignited a long-standing debate: whether higher import duties can reduce gold demand or simply shift trade to the grey market.

Data suggests that the answer may be more complex. According to official statistics, India imported $45.5 billion worth of gold in 2023-24, a 30.1 percent increase from the previous year, despite the country operating under a higher 15 percent effective duty regime on imports.

This data indicates that elevated tariffs did not significantly suppress import demand, with gold continuing to be one of India's largest import items after crude oil. Customs duty on gold was increased from 10.75 percent to 15 percent in July 2022.

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However, in a significant policy shift, the government reduced customs duties on gold and silver from around 15 percent to about 6 percent in the Budget presented in July 2024. Following this reduction, gold imports surged, with imports rising to around $58 billion in 2024-25, driven by a combination of strong global prices and resilient domestic demand.

In a move that has sparked concerns, the government has reinstated the 15 percent customs duty on gold and silver, effective May 12. The combined levy on gold and silver has been raised from 6 percent to 15 percent, with the basic customs duty on gold and silver doubled from 5 percent to 10 percent and the Agriculture Infrastructure and Development Cess raised from 1 percent to 5 percent.

This decision comes amid a broader surge in precious metal imports, following Prime Minister Narendra Modi's appeal to citizens to put off gold purchases for a year and reduce dependence on foreign products.

According to the Global Trade Research Initiative (GTRI), India imported nearly $72 billion worth of gold in FY26, a 25 percent increase from the previous year. Silver imports crossed $12 billion, recording an extraordinary 150 percent annual increase.

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Comparison of Gold Imports Under Different Tariff Regimes

The GTRI noted that India's gold imports are relatively inelastic to customs duty changes at the aggregate level, with global prices, income growth, and investment demand playing a larger role than tariffs. However, the latest tariff changes may alter the economics of imports routed through the United Arab Emirates under the India-UAE CEPA agreement.

According to the think tank, imports from the UAE continue to enjoy preferential access under a tariff-rate quota system, allowing imports at tariffs roughly one percentage point below the normal rate. With the standard customs levy now at 15 percent, gold imported under the UAE quota could enter at around 14 percent.

GTRI warned that the widening tariff differential could encourage greater routing of bullion trade through Dubai, despite the UAE not being a major producer of gold or silver.

The Gem and Jewellery Export Promotion Council (GJEPC) also expressed concerns about the impact of higher import duties on the industry. The council argued that higher import duties rarely curb gold demand and instead increase costs for manufacturers and exporters.

GJEPC proposed measures aimed at reducing dependence on imports, including promoting lower-carat jewellery, increasing recycling, and revamping the Gold Monetisation Scheme to mobilise India's estimated 25,000 tonnes of idle household gold stock.