New Delhi: India raised import tariffs on gold and silver to 15 per cent from 6 per cent on Wednesday, as the government moved to curb overseas bullion purchases and ease pressure on the country’s foreign exchange reserves, Reuters reported, citing official orders.
The new tariff structure comprises a 10 per cent basic customs duty alongside a 5 per cent Agriculture Infrastructure and Development Cess (AIDC), as notified by the Central Board of Indirect Taxes and Customs (CBIC). The revised levy took effect at midnight.
The increase — which more than doubles the earlier rate — is expected to weigh on demand in the world’s second-largest consumer of precious metals. Reuters noted the move could help narrow India’s trade deficit and lend some support to the rupee, which has been among Asia’s weakest-performing currencies this year.
Surendra Mehta, national secretary of the India Bullion and Jewellers Association (IBJA), said the hike was broadly anticipated given the government’s intent to contain the current account deficit, but cautioned that it risked further dampening consumption. “This could affect demand, as gold and silver prices were already elevated,” he told Reuters.
Industry officials also raised concerns about a possible revival of bullion smuggling. A Mumbai-based bullion dealer at a private bank, who declined to be named, warned that informal channels could reactivate given the profit potential at current gold prices. “Grey markets are likely to become active, as the incentives to bring in gold illegally are high,” the dealer said, according to Reuters. Smuggling had eased considerably after India cut gold import tariffs in mid-2024, and industry insiders said Wednesday’s sharp reversal risks undoing that improvement.
The bullion market had already been disrupted before the latest order. An earlier government imposition of a 3 per cent Integrated Goods and Services Tax (IGST) on gold and silver imports had compelled banks to halt purchases for more than a month while compliance procedures were resolved. Banks subsequently resumed buying after absorbing the IGST charge, but bullion dealers said volumes are likely to fall sharply once again following the customs duty increase. April gold imports had already dropped to a near 30-year low on account of those earlier curbs and elevated global prices, Reuters noted.
The CBIC notification also revised duties on jewellery “findings” — small components used in jewellery manufacturing such as hooks, clasps, and pins — which will now attract a 5 per cent customs duty.
The duty revision followed Prime Minister Narendra Modi’s appeal to citizens to avoid purchasing gold for a year, citing the West Asia conflict and rising crude oil prices as reasons to limit non-essential imports. Separately, the World Gold Council reported that inflows into India’s gold exchange-traded funds rose 186 per cent year-on-year to a record 20 metric tonnes in the March quarter, reflecting strong domestic investor appetite for the metal even as the government moves to rein in physical imports.
Source: https://www.chinimandi.com/india-hikes-gold-and-silver-import-duty-to-15-citing-forex-pressure/
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