The government is considering reducing the import duty on gold and silver from the current 15% to 6%. However, no final decision has been taken on this yet. This could impact the prices of precious metals.

The government is considering reducing the gold and silver import duty.

The central government is seriously considering withdrawing the increased import duty on gold and silver to curb smuggling and facilitate trade. Bullion traders and jewelers' associations have been demanding that the government reduce the tax on gold imports back to 6% to maintain formal trade. Meanwhile, a government official stated that some departments are assessing whether lower taxes will curb smuggling and increase formal imports. At present, no official decision has been taken on this matter.

During the July 2024 budget, the government reduced the import duty on gold from 15% to 6%. Subsequently, on May 13, 2026, it was raised back to 15% to address pressure on foreign exchange reserves and the rising import bill. Now, the government is considering a U-turn on this decision.

Why is the government considering this?

High taxes on gold and silver imports have fueled illegal gold smuggling and the parallel economy (grey market). This has widened the price gap between official and unofficial imports. While the government increased import duties to conserve dollar reserves, when unofficial dollar demand increases due to smuggling, the dollar becomes more expensive in the open market.

Industry representatives say high taxes have encouraged smuggling. India typically buys 700-800 tonnes of gold annually and exports finished jewellery to markets such as the UAE, Thailand and Singapore.

What will be the impact on prices?

If the government indeed increases the import duty on gold from 6% to 15%, it will significantly reduce the tax burden per 10 grams of gold. The reduction in import duty will significantly reduce import costs by 9%, leading to an immediate decline in prices in the local market. Bullion markets are already experiencing significant discounts due to speculation and news of a potential duty cut in August. Now, with the official announcement, further price reductions are likely.