India hikes gold and silver tariffs to 15% to curb imports, support rupee

What Happened

• The central government raised the import tariff on gold and silver to 15% effective May 13, 2026, through customs notifications issued on May 12, 2026.
• The new structure comprises a Basic Customs Duty (BCD) of 10% and an Agriculture Infrastructure and Development Cess (AIDC) of 5%, combining to a headline tariff of 15%.
• The hike reverses a reduction implemented in July 2024, when the combined import duty was cut to 6% (5% BCD + 1% AIDC) to curb smuggling and formalise the gold trade.
• The stated rationale is to reduce non-essential imports, conserve foreign exchange reserves, and ease pressure on the Indian rupee, which has faced depreciation pressure in 2026.
• Average monthly gold imports rose sharply to approximately 83 tonnes in early 2026 from 53 tonnes per month in 2025, underscoring surging import volumes that strained the current account.

Static Topic Bridges

Customs Duty Structure: Basic Customs Duty, AIDC, and Effective Rate

India's import tariff regime on commodities like gold and silver is layered — composed of multiple levies that together constitute the effective rate of taxation. The Basic Customs Duty (BCD) is the primary import levy, imposed under the Customs Act, 1962, and specified in the Customs Tariff Act, 1975. The Agriculture Infrastructure and Development Cess (AIDC) was introduced in the Union Budget 2021-22 and is levied on a range of imports; revenues are earmarked for agriculture infrastructure financing. On gold imports, the Social Welfare Surcharge (SWS) is also levied as a percentage of basic customs duty. At the point of retail sale within India, Goods and Services Tax (GST) at 3% applies on gold jewellery and bullion. The total effective import burden, including IGST paid at the import stage, stands at approximately 18.45% post-hike.

Current Account Deficit (CAD) and Gold Imports

India is the world's second-largest consumer of gold, and gold imports consistently represent one of the largest components of the country's import bill. The Current Account Deficit (CAD) — the difference between the value of goods and services imported and exported — is significantly influenced by gold import volumes. A high CAD exerts downward pressure on the rupee, as it signals net outflow of foreign exchange. The Foreign Exchange Management Act (FEMA), 1999 governs cross-border capital flows and foreign exchange transactions in India; import payments for gold are settled in foreign exchange, directly affecting forex reserves. The RBI manages forex reserves to maintain exchange rate stability, and large gold import spikes constrain the RBI's ability to defend the rupee.

Paris Club of Import Duties: Reversals as Policy Signal

India's gold import duty history is a case study in policy oscillation driven by competing objectives. High duties (12.5% pre-2024) created wide arbitrage margins that incentivised smuggling, damaging both formal trade and government revenue. The July 2024 reduction to 6% was designed to formalise trade flows, boost legitimate imports, and benefit the gems and jewellery export sector, which depends on legally imported gold. The May 2026 reversal — raising duty to 15% — signals that forex conservation has temporarily overridden formalisation objectives, reflecting the classic gold policy dilemma that policymakers face.

Key Facts & Data

• New gold/silver import tariff (effective May 13, 2026): 15% (BCD 10% + AIDC 5%)
• Total effective import burden (including IGST 3%): approximately 18.45%
• Previous rate (post-July 2024): 6% total tariff
• Gold imports 2025: USD 58.9 billion
• Silver imports 2025: USD 9.2 billion (up 44% YoY)
• Average monthly gold imports (early 2026): 83 tonnes vs 53 tonnes in 2025
• Duty-free import cap under Advance Authorisation Scheme: 100 kg (post-hike)
• Legal basis: Customs Tariff Act, 1975 (BCD); Union Budget 2021-22 (AIDC); FEMA, 1999 (foreign exchange)
• India: World's second-largest gold consumer