India's Gold Import Crisis: Banks Halt Shipments, Prompting Month-Long Supply Disruption

India's Gold Imports Resume After Month-Long Halt

As of May 2026, Indian banks have resumed gold and silver imports after a halt lasting over a month. This decision was made despite the underlying tax dispute not being resolved, with banks agreeing to pay a 3 percent levy that the government had waived for nearly a decade.

India's gold imports in April 2026 fell to approximately 15 metric tons, a near 30-year low, against a monthly average of roughly 60 metric tons in the previous financial year. The collapse was almost entirely caused by the import halt, which coincided with Akshaya Tritiya, one of India's biggest gold-buying occasions.

The IGST and Gold Imports

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The Integrated Goods and Services Tax (IGST) is levied on goods entering India from abroad. Introduced in 2017 as part of India's unified GST framework, it was initially exempted for gold-importing banks. However, when the new financial year began on April 1, 2026, customs authorities began demanding the 3 percent IGST on gold and silver shipments routed through banks.

Government's Motivation

Gold imports are paid for in foreign currency, primarily US dollars, which pressure India's foreign exchange reserves and widen the trade deficit. The rupee has been under significant strain, losing roughly 5 percent against the US dollar in 2025 and depreciating approximately 4.1 percent against the dollar since January 1, 2026.

Impact on Import Volumes

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The impact of the halt was severe, with India's gold imports in April 2026 estimated to have fallen to approximately 15 metric tons, a near 30-year low. For comparison:

Resumption of Imports

Banks have resumed clearing gold and silver shipments from customs by paying the 3 percent IGST levy. A government official confirmed that banks cleared approximately 9 metric tons of gold and 34 metric tons of silver so far in May 2026 after paying the tax.

Future Outlook

The resumption of imports is expected to push volumes higher, widening the trade deficit and adding further pressure on the rupee. However, stronger demand from Indian banks returning to the market could support global bullion prices. Local jewellers who had been running low on inventory are expected to restock as bank imports resume. Despite improved supply, demand inside India remains weak, leaving gold trading at a discount in the domestic market.