India Weighs Gold and Silver Duty Cut as Industry Flags Smuggling Concerns

India’s central government is considering whether to reduce import duties on gold and silver, amid growing concerns that the higher tax burden may be pushing a larger share of precious-metal trade into unofficial channels. While no final decision has been taken, discussions are reportedly taking place within the government over whether a lower duty could encourage more imports through formal routes.

The development comes just months after the government increased duties on gold and silver on May 13, 2026. The earlier move was aimed at discouraging excessive imports and protecting India’s foreign exchange reserves at a time when the country was facing pressure from rising gold purchases and a weakening rupee.

Jewellery Industry Seeks Major Reduction

Bullion traders and jewellery industry representatives are pressing for the import duty to be brought down from the current 15 percent to 6 percent. Their argument is that the existing duty has created a substantial difference between the cost of legally imported precious metals and those entering the country through unofficial routes.

According to industry representatives, reducing the duty could make formal imports more competitive and potentially decrease the financial incentive for smuggling. The government is examining this possibility, although the extent and timing of any potential reduction remain unclear.

The Finance Ministry had been approached for a response on the matter, but no response had been received at the time of publication of the report.

Why the Government Raised Duties

The May duty increase came after gold imports surged sharply earlier in the year. Gold imports were nearly 82 percent higher year-on-year in April 2026, raising concerns about the impact of the purchases on India’s external finances.

Gold is a major import for India, with the country typically bringing in around 700-800 tonnes annually. A large increase in imports can put additional pressure on foreign exchange reserves and contribute to a wider current account deficit. Such pressures can also affect the domestic currency.

The rupee had already fallen by more than 6 percent against major currencies on a year-to-date basis by the middle of May. The government’s decision to raise duties was therefore partly linked to the need to control the demand for imported gold and limit the associated outflow of foreign currency.

Imports Continued Despite Higher Duty

The higher duty did not immediately result in a decline in gold imports. Gold imports increased by nearly 34 percent in May, although the revised duty applied for only about half of that month.

More importantly, imports remained elevated during the first two complete months following the duty increase. Gold imports in June and July together rose 5.5 percent year-on-year to about $6.13 billion, compared with $5.81 billion during the corresponding period a year earlier.

These figures have added another dimension to the policy debate. If higher duties do not significantly reduce underlying demand, policymakers must weigh whether the tax is simply shifting some of the trade away from formal channels.

Industry participants have claimed that smuggling increased following the duty hike. Their contention is that while the policy was designed to conserve foreign exchange, some of the potential savings in official imports may have been offset by greater activity in the parallel market.

Wider Impact on Precious Metals

The discussions are not limited to gold. Silver and platinum are also understood to be part of the broader consideration of precious-metal import duties.

Silver has uses extending well beyond investment and jewellery. It plays an important role in industries such as solar energy and electronics. Platinum is similarly used in areas including automobiles and healthcare. Higher import costs for these metals can therefore have consequences beyond the jewellery sector, potentially increasing input expenses for businesses that depend on them.

This creates a difficult policy balance for the government. Higher duties can help limit foreign-exchange outflows and discourage imports, but they can also increase costs for industries that rely on imported precious metals.

No Final Decision Yet

For now, the reported discussions should not be interpreted as confirmation of an imminent duty cut. Sources cited in the report indicated that the government has not reached a final decision, while the possible size, timing and scope of any change remain uncertain.

If the government eventually reduces the duty, the move could provide some relief to bullion traders and jewellery businesses while making formal imports relatively more attractive. Consumers could also watch the policy closely because changes in import costs can influence domestic precious-metal pricing.

At the same time, policymakers will have to consider the original reasons behind the May increase, particularly foreign-exchange management, import demand and pressure on the current account.

The debate therefore reflects a broader challenge: finding a tax structure that discourages excessive imports without creating such a large price gap that unofficial trade becomes more attractive.