Government may cut gold, silver import duties as higher rates fuel grey market: Report
The Centre may reconsider its higher import duties on gold and silver after the 15% levy failed to curb imports and industry flagged a sharp expansion in the grey market. As per experts, discussions are underway, even as the duty hike has boosted customs revenue and intensified action against smuggling.
- Aug 31, 2026,
- Updated Aug 31, 2026 5:20 PM IST
The Centre is discussing a possible reduction in import duties on gold and silver after the sharp increase in rates failed to curb imports and instead contributed to the expansion of the grey market, Rajesh Rokde, Chairman of the Gems & Jewellery Council, told the Economic Times.
“The duty isn't proving effective,” Rokde said, adding that the jewellery industry had warned the government that higher duties could encourage illegal trade. According to him, imports remained largely unaffected despite the higher levy, while the grey market expanded significantly.
Duty hike
Rokde said the government could reconsider the policy and that discussions on the issue are “certainly” ongoing, although no final decision has been taken.
“The expectation was that imports would drop, but that didn’t happen, and imports remained largely unaffected, while the grey market expanded significantly,” he said.
According to Rokde, the government may be waiting for the appropriate opportunity to announce a change. The Centre had sharply raised the effective customs duty on gold and silver to 15% from 6% on May 13, while the duty on platinum rose to 15.4% from 6.4%.
The increase was aimed at making precious metal imports more expensive and containing foreign exchange outflows.
India, the world's second-largest gold consumer after China, imports around 700-900 tonnes of gold annually. Government data showed gold imports surged 24% in FY26 to a record $71.9 billion, even though import volumes declined to 721 tonnes.
MUST READ: Silver may be cheaper than gold as 2026 draws to a close: Report
Customs revenue
The higher duty has nevertheless generated substantial revenue for the government. Between May 13 and August 2, the Centre collected ₹10,463 crore in customs duty from precious metal imports, according to data presented in Parliament.
Gold accounted for ₹10,040 crore of the collection, including gold plated with platinum. Silver contributed ₹328 crore, while platinum accounted for ₹95 crore.
The government has also intensified enforcement against illegal imports following the duty increase. Between May 13 and June 30, agencies registered 287 cases, seized 160.91 kg of gold and arrested 116 people, according to a written reply by Minister of State for Finance Pankaj Chaudhary in the Lok Sabha.
Customs field formations and the Directorate of Revenue Intelligence (DRI) are continuing to monitor smuggling activities, Minister of State for Commerce and Industry Jitin Prasada said.
DO READ: Gold at $4,400: Is it still worth buying after the latest rally?
Idle household gold
The government has also clarified that it does not maintain official data on the amount of unused or idle gold held by Indian households.
Separately, India's foreign exchange reserves included 880.52 tonnes of physical gold held by the Reserve Bank of India as of May 29, 2026, Chaudhary said. The RBI has also clarified that it had not sold any gold, rejecting reports that it had disposed of part of its holdings.
For the government, the higher duty has therefore produced stronger customs collections and enforcement, but industry concerns remain that elevated import costs could encourage more activity through unofficial channels.
The Centre is discussing a possible reduction in import duties on gold and silver after the sharp increase in rates failed to curb imports and instead contributed to the expansion of the grey market, Rajesh Rokde, Chairman of the Gems & Jewellery Council, told the Economic Times.
“The duty isn't proving effective,” Rokde said, adding that the jewellery industry had warned the government that higher duties could encourage illegal trade. According to him, imports remained largely unaffected despite the higher levy, while the grey market expanded significantly.
Duty hike
Rokde said the government could reconsider the policy and that discussions on the issue are “certainly” ongoing, although no final decision has been taken.
“The expectation was that imports would drop, but that didn’t happen, and imports remained largely unaffected, while the grey market expanded significantly,” he said.
According to Rokde, the government may be waiting for the appropriate opportunity to announce a change. The Centre had sharply raised the effective customs duty on gold and silver to 15% from 6% on May 13, while the duty on platinum rose to 15.4% from 6.4%.
The increase was aimed at making precious metal imports more expensive and containing foreign exchange outflows.
India, the world's second-largest gold consumer after China, imports around 700-900 tonnes of gold annually. Government data showed gold imports surged 24% in FY26 to a record $71.9 billion, even though import volumes declined to 721 tonnes.
MUST READ: Silver may be cheaper than gold as 2026 draws to a close: Report
Customs revenue
The higher duty has nevertheless generated substantial revenue for the government. Between May 13 and August 2, the Centre collected ₹10,463 crore in customs duty from precious metal imports, according to data presented in Parliament.
Gold accounted for ₹10,040 crore of the collection, including gold plated with platinum. Silver contributed ₹328 crore, while platinum accounted for ₹95 crore.
The government has also intensified enforcement against illegal imports following the duty increase. Between May 13 and June 30, agencies registered 287 cases, seized 160.91 kg of gold and arrested 116 people, according to a written reply by Minister of State for Finance Pankaj Chaudhary in the Lok Sabha.
Customs field formations and the Directorate of Revenue Intelligence (DRI) are continuing to monitor smuggling activities, Minister of State for Commerce and Industry Jitin Prasada said.
DO READ: Gold at $4,400: Is it still worth buying after the latest rally?
Idle household gold
The government has also clarified that it does not maintain official data on the amount of unused or idle gold held by Indian households.
Separately, India's foreign exchange reserves included 880.52 tonnes of physical gold held by the Reserve Bank of India as of May 29, 2026, Chaudhary said. The RBI has also clarified that it had not sold any gold, rejecting reports that it had disposed of part of its holdings.
For the government, the higher duty has therefore produced stronger customs collections and enforcement, but industry concerns remain that elevated import costs could encourage more activity through unofficial channels.