India Raises Gold Import Duty to 15%: Jewellery Industry Warns of Smuggling Surge
The Indian government’s decision to more than double the import duty on gold and silver is being described as a “retrograde step” by the Gems and Jewellery Export Promotion Council and the All India Gems and Jewellery Domestic Council. With the duty increasing from 6% to 15%, industry experts are concerned not only about an immediate decline in retail demand but also about the long-term impact on gold imports into the country. Historically, whenever import duties have crossed the double-digit mark, concerns over a rise in gold smuggling have intensified significantly.
When official imports are taxed at 15%, the landed cost of gold in India becomes significantly higher than in neighboring hubs like Dubai or Singapore. This creates a massive arbitrage gap. Smugglers, who bypass official channels and taxes, can offer gold at a "discount" to legal retailers while still making substantial profits. Experts suggest that a gap of ₹27,000 per 10 grams is more than enough to cover the risks and costs associated with illicit transit, potentially undoing years of work spent moving the industry toward an organized, transparent structure.
Rajesh Rokde, Chairman of the GJC, warned that this move could "spur the grey market and heighten smuggling risks," effectively creating a parallel economy. In 2024, the government had significantly lowered duties precisely to combat the grey market and encourage legal transactions. By reversing this stance, there is a fear that small-scale manufacturers and MSMEs, the backbone of the Indian jewelry industry, will be forced to choose between uncompetitive official gold or more affordable, albeit illegal, supplies to stay in business.
The Arbitrage Opportunity
When official imports are taxed at 15%, the landed cost of gold in India becomes significantly higher than in neighboring hubs like Dubai or Singapore. This creates a massive arbitrage gap. Smugglers, who bypass official channels and taxes, can offer gold at a "discount" to legal retailers while still making substantial profits. Experts suggest that a gap of ₹27,000 per 10 grams is more than enough to cover the risks and costs associated with illicit transit, potentially undoing years of work spent moving the industry toward an organized, transparent structure.
The Resurrection of the Grey Market
Rajesh Rokde, Chairman of the GJC, warned that this move could "spur the grey market and heighten smuggling risks," effectively creating a parallel economy. In 2024, the government had significantly lowered duties precisely to combat the grey market and encourage legal transactions. By reversing this stance, there is a fear that small-scale manufacturers and MSMEs, the backbone of the Indian jewelry industry, will be forced to choose between uncompetitive official gold or more affordable, albeit illegal, supplies to stay in business.
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