Diwali bling goes underground: Illegal gold imports surge 1,500% as higher taxes bite
India's unofficial gold imports surged to 50 tonnes in the September quarter as higher import duties encouraged smuggling and cash transactions without invoices, raising concerns over tax evasion and risks for consumers.
- Nov 3, 2026,
- Updated Nov 3, 2026 12:40 PM IST
India's illegal gold imports have surged to their highest level in three years, with unofficial shipments jumping more than 1,500% during the July-September quarter as higher import duties pushed more bullion trade into informal channels, according to a World Gold Council (WGC) report cited by Bloomberg.
Informal gold imports climbed to 50 metric tonnes during the quarter, compared with just 3 tonnes in the corresponding period last year. The figures, sourced from consultancy Metals Focus, highlight the widening gap between India's formal bullion trade and an expanding underground market.
Why are illegal gold imports rising?
The sharp increase follows the government's decision to more than double import levies on gold and silver to 15% earlier this year. The move was intended to discourage imports and contain India's widening trade deficit, which has come under pressure from elevated energy prices.
However, higher duties have also made unofficial imports more attractive by increasing the potential savings from avoiding customs payments.
The WGC observed that previous increases in import taxes have generally strengthened incentives to bring gold into the country through unofficial routes.
These channels can include smuggling networks and smaller quantities carried by individuals that evade applicable customs requirements.
India is the world's second-largest gold consumer, but limited domestic production means the country relies heavily on imports to meet demand.
Gold purchases are deeply embedded in Indian households, particularly during weddings, religious festivals and celebrations such as Diwali. The metal is also widely regarded as a store of wealth and a financial safety net.
Cash purchases without bills gain ground
The increase in unofficial imports has coincided with growing interest in cash-based gold transactions that leave little documentation.
According to Bloomberg, higher taxes have encouraged more households to purchase bullion and jewellery through under-the-counter transactions without formal invoices.
Such deals can allow sellers to avoid reporting sales and potentially evade applicable taxes, while buyers may be attracted by lower upfront prices.
However, these transactions create risks for consumers.
Without proper invoices, buyers may struggle to establish ownership, verify transaction details or resolve disputes over purity and weight.
The absence of documentation can also complicate future resale, exchange transactions and insurance claims.
ALSO READ: BT Explainer | Gold loans surge 83% to ₹5.77 lakh crore: What happens if gold prices fall 15%?
What does this mean for organised jewellers?
The expanding informal market could put organised jewellery retailers at a competitive disadvantage.
Businesses complying with customs duties, GST requirements and documentation rules face costs that sellers operating outside formal channels may avoid.
This creates an uneven playing field, particularly when price-sensitive customers prioritise discounts over documented purchases.
Will Diwali revive gold demand?
India's overall gold demand increased sequentially during the September quarter, although most indicators suggested consumption remained below year-earlier levels.
Traditionally, the final quarter witnesses stronger purchases as Diwali and the wedding season encourage households to buy jewellery, coins and bars.
However, the anticipated festive recovery remains uncertain.
According to Bloomberg, jewellers have been holding back purchases in anticipation of further price declines.
Gold prices fell 6.8% in October and slipped below the psychologically important $4,000-per-ounce mark.
For consumers, the combination of falling prices and attractive informal-market discounts may appear tempting. However, purchasing hallmarked gold from reputable sellers with proper invoices remains important for protecting the value and authenticity of their purchases.
India's illegal gold imports have surged to their highest level in three years, with unofficial shipments jumping more than 1,500% during the July-September quarter as higher import duties pushed more bullion trade into informal channels, according to a World Gold Council (WGC) report cited by Bloomberg.
Informal gold imports climbed to 50 metric tonnes during the quarter, compared with just 3 tonnes in the corresponding period last year. The figures, sourced from consultancy Metals Focus, highlight the widening gap between India's formal bullion trade and an expanding underground market.
Why are illegal gold imports rising?
The sharp increase follows the government's decision to more than double import levies on gold and silver to 15% earlier this year. The move was intended to discourage imports and contain India's widening trade deficit, which has come under pressure from elevated energy prices.
However, higher duties have also made unofficial imports more attractive by increasing the potential savings from avoiding customs payments.
The WGC observed that previous increases in import taxes have generally strengthened incentives to bring gold into the country through unofficial routes.
These channels can include smuggling networks and smaller quantities carried by individuals that evade applicable customs requirements.
India is the world's second-largest gold consumer, but limited domestic production means the country relies heavily on imports to meet demand.
Gold purchases are deeply embedded in Indian households, particularly during weddings, religious festivals and celebrations such as Diwali. The metal is also widely regarded as a store of wealth and a financial safety net.
Cash purchases without bills gain ground
The increase in unofficial imports has coincided with growing interest in cash-based gold transactions that leave little documentation.
According to Bloomberg, higher taxes have encouraged more households to purchase bullion and jewellery through under-the-counter transactions without formal invoices.
Such deals can allow sellers to avoid reporting sales and potentially evade applicable taxes, while buyers may be attracted by lower upfront prices.
However, these transactions create risks for consumers.
Without proper invoices, buyers may struggle to establish ownership, verify transaction details or resolve disputes over purity and weight.
The absence of documentation can also complicate future resale, exchange transactions and insurance claims.
ALSO READ: BT Explainer | Gold loans surge 83% to ₹5.77 lakh crore: What happens if gold prices fall 15%?
What does this mean for organised jewellers?
The expanding informal market could put organised jewellery retailers at a competitive disadvantage.
Businesses complying with customs duties, GST requirements and documentation rules face costs that sellers operating outside formal channels may avoid.
This creates an uneven playing field, particularly when price-sensitive customers prioritise discounts over documented purchases.
Will Diwali revive gold demand?
India's overall gold demand increased sequentially during the September quarter, although most indicators suggested consumption remained below year-earlier levels.
Traditionally, the final quarter witnesses stronger purchases as Diwali and the wedding season encourage households to buy jewellery, coins and bars.
However, the anticipated festive recovery remains uncertain.
According to Bloomberg, jewellers have been holding back purchases in anticipation of further price declines.
Gold prices fell 6.8% in October and slipped below the psychologically important $4,000-per-ounce mark.
For consumers, the combination of falling prices and attractive informal-market discounts may appear tempting. However, purchasing hallmarked gold from reputable sellers with proper invoices remains important for protecting the value and authenticity of their purchases.