BRIC Team reports: The Indian government has doubled the effective tax paid on the import of gold and silver to a total of 18.4% from the previous 9.2%, effective from May 13, 2026. It made the changes through two separate notifications issued late night on May 12. Previously, the basic customs duty on gold and silver stood at 5%, with a 1% Agriculture Infrastructure and Development Cess (AIDC), and a 3% Integrated Goods and Services Tax (IGST) rate on the total assessable value of the imports, which includes the cost, insurance, and freight price, and the applicable basic customs duties, taking the effective import tax to about 9.2%.Now, the customs duty has been hiked to 10%, and the AIDC has become 5%, taking the effective tax rate, including the IGST, to about 18.4%.
The decision comes soon after Prime Minister Narendra Modi’s exhortations to the public to reduce gold purchases for at least a year, among other actions, to help protect India’s foreign exchange reserves and the rupee exchange rate. PM repeats call for saving fuel, cutting gold buy; bats for work from homeAccording to industry players and experts, this “retrograde” and “blunt” decision will not only encourage a shift to smuggling, since the Indian appetite for gold is largely cultural, but will also have other negative effects on employment. The Ministry of Finance has not yet released an official statement on the duty hikes or its justifications.
Background
‘Prudent management’Sources in the government have, however, defended the decision saying it was taken against the backdrop of the impact of the West Asia crisis on India’s current account deficit (CAD). The CAD is the margin by which a country’s total imports of goods, services, and transfers exceeds its exports.The current geopolitical situation has created significant volatility in global crude oil markets and international shipping routes,” the source explained. “In contrast, precious metals, while culturally and financially significant, are predominantly consumption and investment driven in nature,” they said.
Key facts
- The Indian government has doubled the effective tax paid on the import of gold and silver to a total of 18.4% from the previous 9.2%, effective from May 13, 2026.
- It made the changes through two separate notifications issued late night on May 12.
- The Ministry of Finance has not yet released an official statement on the duty hikes or its justifications.
What this means
“Such imports involve substantial outflow of foreign exchange.” ‘Will increase smuggling’Industry players, economists, and investment advisors have said that the decision is not likely to impact Indians’ demand for gold, and would instead increase smuggling. “Our consistent position is that hiking import duties rarely curbs gold imports — it merely inflates prices,” the Gem & Jewellery Export Promotion Council said in a statement. “Despite gold prices doubling recently, imports have not declined proportionally.
Such measures often fuel smuggling and escalate export costs.” PM Modi’s call to stop foreign travel comes as spending in this area has already been fallingThis sentiment was echoed by Sachin Sawrikar, Founder and Managing Partner at Artha Bharat Investment Managers, who termed the import duty hike as a “blunt instrument that history tells us rarely achieves its intended purpose”. “India’s appetite for precious metals is structural, not cyclical; it is woven into savings culture, festive demand, and portfolio behaviour across hundreds of millions of households,” Mr. “When the price of the legal channel rises this steeply, a well-established informal trade, call it grey-market or smuggled supply, simply fills the gap.”‘MSMEs will be hurt’Another fear among experts is the impact this decision would have on the domestic industry and all those it employs.“Trying to micromanage consumer and industry behaviour via trade policy has substantial trade offs that we have to be careful about,” Rahul Ahluwalia, Founder-Director of Foundation for Economic Development, said.
