Government raises gold import duty to 15%: Will it cool India's appetite for bullion?

India has raised the effective import duty on gold and silver to around 15% as part of a broader effort to curb non-essential imports and manage pressures arising from rising precious metal imports. The move comes at a time when gold and silver purchases have surged despite elevated prices, making bullion one of the country's largest import categories.

According to the Department of Economic Affairs' Monthly Economic Review for May 2026, India imported gold and silver worth $84 billion in FY26, accounting for 10.8% of total merchandise imports. The scale of these imports has drawn policy attention, prompting the government to revise the duty structure for precious metals.

Under the revised framework, the government increased the Basic Customs Duty (BCD) on gold, silver and platinum from 5% to 10%, while also raising the Agriculture Infrastructure and Development Cess (AIDC). As a result, the effective import duty on gold and silver has increased to approximately 15%. The new rates came into effect on May 13, 2026.

Precious metal imports

The duty hike follows a period of strong growth in bullion imports.

The review noted that merchandise imports in April 2026 were driven in part by higher purchases of gold and silver. Gold imports increased 81.7% year-on-year, while silver imports surged 157.2% year-on-year. The report attributed this rise to higher gold and silver prices, which had increased 46.7% and 135.4%, respectively.

The increase in imports contributed to India's overall merchandise import bill and was one of the factors influencing trade dynamics during the month.

Non-essential imports

According to the review, the government's objective is to discourage discretionary demand for imported precious metals through price signals.

"To curb non-essential imports by discouraging discretionary demand through price signals, the Government increased customs duties on gold, silver, and platinum," the report stated.

In addition to higher duties, the government has tightened import regulations for silver. Imports of silver under specific Harmonised System (HS) codes have been moved from the 'free' category to the 'restricted' category, signalling a more cautious approach toward precious metal imports.

What the Monthly Economic Review says

The Monthly Economic Review highlighted the importance of bullion imports in India's external trade position. During FY26, gold and silver imports worth $84 billion accounted for more than one-tenth of the country's merchandise imports.

The report also noted that India's merchandise imports rose 10% year-on-year in April 2026, while the merchandise trade deficit widened marginally to $28.4 billion from $27.1 billion a year earlier.

The increase in customs duties therefore forms part of a broader strategy to manage import composition and moderate demand for non-essential imports.

Demand slowdown

Early industry estimates suggest the higher duty may already be affecting demand. According to the India Bullion & Jewellers Association (IBJA), gold demand fell to around 7.5 tonnes in the fortnight ended May 27, compared with about 25 tonnes during the same period last year, indicating a decline of nearly 70%.

"Reports trickling in from jewellers across India show that there has been a 70% drop in demand after the import duty was hiked," said Surendra Mehta, National Secretary of IBJA. Industry participants also noted that the unorganised sector, which accounts for a large share of India's gold trade, has been among the worst affected.

Whether the higher duty results in a sustained moderation in imports will become clearer in the coming months. For now, the government's move represents one of the most significant recent interventions in the bullion market, targeting a category that accounted for $84 billion of India's imports in FY26 while also seeking to influence consumer demand through higher import costs.