Indian Banks Resume Gold Imports After Temporary Tax Halt

India's Gold Imports Resume After Over a Month-Long Hiatus

Indian banks have resumed gold and silver imports after a hiatus that stretched for more than a month, with trade and government sources confirming that lenders have agreed to pay a 3% customs levy. The resumption is expected to boost the country's gold imports, widen the trade deficit, and put more pressure on the rupee, which is among Asia's worst-performing currencies this year.

The move comes as Prime Minister Narendra Modi urged people to avoid buying gold for a year to help preserve the country's foreign exchange reserves. Despite the pressure on India's balance of payments and the rupee, stronger demand from India, the world's second-largest gold buyer after China, could support global gold and silver prices and help local jewellers replenish their inventories.

India's Gold Imports Statistics

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

Banks, which import most of India's refined gold, halted shipments at the start of the new financial year on April 1 after customs authorities began demanding a 3% integrated goods and services tax (IGST) on the metal. When India adopted the IGST regime in 2017, gold-importing banks were exempted from paying the 3% levy.

The resumption of gold and silver imports has improved supply, but demand remains weak, leaving gold trading at a discount. Dealers in India offered discounts of up to $17 an ounce over official domestic prices this week, inclusive of 6% import and 3% sales levies.