Govt Raises Gold Import Duty Amid Oil Shock, Forex Concerns

The Government has raised import duties on gold, silver and other precious metals, as it looks to curb imports and ease pressure on foreign exchange reserves amid rising geopolitical tensions and elevated crude oil prices. The revised duty structure, notified by the Department of Revenue under the Customs Act, will come into effect from May 13, 2026.

Under the new structure, imports of gold and silver will attract a 10% basic customs duty and a 5% Agriculture Infrastructure and Development Cess, as against 6% total earlier. The move effectively raises the import tax burden on precious metals and related products, including jewellery findings and industrial imports linked to precious metal recovery and recycling.

The decision comes at a time when the government is attempting to contain external sector vulnerabilities triggered by the ongoing West Asia conflict and the sharp rise in global crude oil prices following disruptions linked to the US-Iran war. India imports nearly 85% of its crude oil requirements, making elevated energy prices a significant drain on foreign exchange reserves.

Earlier this week, Prime Minister Narendra Modi has also called for austerity measures, urging citizens to reduce fuel consumption, postpone foreign travel and destination weddings abroad, and cut discretionary spending on gold purchases. The government’s latest duty hike aligns with that broader push to moderate non-essential imports and preserve macroeconomic stability.

India’s gold imports have surged sharply over the past few years, driven largely by rising global prices. Gold imports rose more than 24% to a record $71.98 billion in 2025–26, compared with $58 billion in 2024–25. Imports stood at $45.54 billion in 2023–24 and $35 billion in 2022–23.

Yet, the rise in value was primarily price-led rather than volume-driven. Demand has remained resilient despite elevated prices, as investors increasingly view gold as a safe-haven asset during periods of geopolitical uncertainty.

The surge in imports has added pressure on India’s external balances. The country’s trade deficit widened to $333.2 billion in 2025–26, while the current account deficit rose to $13.2 billion, or 1.3% of GDP, in the October–December quarter, according to data from the Reserve Bank of India. Gold now accounts for more than 9% of India’s total imports, which stood at $775 billion in 2025–26.

The notification also revises duty rates on jewellery findings such as hooks, clasps and screw backs used in jewellery manufacturing. Gold and silver findings will now attract 5% customs duty, while platinum findings will face a 5.4% levy. Imports of spent catalysts and ash containing precious metals for recycling purposes will attract a concessional customs duty of 4.35%, subject to compliance conditions.

The government has additionally tightened concessional duty benefits for gold imports from the United Arab Emirates under the fixed-quantity quota mechanism, signalling a broader effort to rein in precious metal inflows.