In a significant move aimed at regulating the influx of precious metals and managing the national trade deficit, the Central Government has announced a substantial hike in the import duty on gold, silver, and other precious metals. This decision implies that importing gold, silver, and platinum from foreign countries will now incur a much higher tax burden. The Ministry of Finance issued several notifications on Tuesday detailing the revised tax structure. These new rates have officially come into effect starting today, May 13. Under the new regulations, the Basic Customs Duty (BCD) on gold has been doubled from the previous 5 percent to 10 percent. Also, the Agriculture Infrastructure and Development Cess (AIDC) has also been adjusted, leading to an overall increase in the cost of imported precious metals.
Detailed Breakdown of the Import Duty Hike
According to the official notification, the revised rates aren't limited to gold biscuits or bricks alone. The government has extended the scope of this hike to include small components used in jewelry making, such as hooks, pins, and screws. Plus, a 10 percent tax will now be levied on the import of scrap or waste materials used for extracting gold and silver from old metals. To understand the impact, it's essential to look at the previous structure: until now, gold attracted a 5 percent Basic Customs Duty (BCD) and a 1 percent AIDC, totaling an effective duty of 6 percent. This has now been Importantly increased. The government has also revised the concessional import duty rates for gold imported from the UAE under specific quotas, ensuring that even these imports align with the new fiscal policy.
Context of the July 2024 Budget Changes
It's noteworthy that in the Union Budget of July 2024, the government had drastically reduced the total import duty on gold from 15 percent to 6 percent. At that time, the BCD was slashed from 10 percent to 5 percent, and the AIDC was reduced from 5 percent to 1 percent. However, following this reduction, India witnessed a massive surge in gold imports, while during the financial year 2025, gold imports reached an all-time high of approximately $58 to $60 billion. This surge prompted the government to reconsider its stance and re-increase the duties to stabilize the economy and protect the foreign exchange reserves.
Impact on Consumers and the Jewelry Industry
The hike in import duty is expected to have a far-reaching impact on bullion traders, jewelers, and the general public. For jewelers, the cost of sourcing raw materials from international markets will rise, which is likely to lead to a spike in the domestic prices of gold and silver. This will directly affect consumers planning purchases for weddings or investment purposes, while beyond the jewelry sector, the industrial sector will also feel the pinch. Companies that work with precious metals for industrial applications or recycling processes will face higher operational costs. As India is the world's second-largest consumer of gold and the largest consumer of silver, any change in its import policy is closely watched by global markets.
PM Modi's Appeal and Economic Rationale
The government's decision comes on the heels of a recent address by Prime Minister Narendra Modi, where he urged citizens to exercise restraint in gold purchases. Citing tensions in the Middle East and the resulting volatility in crude oil prices, the PM advised the nation to avoid buying gold for at least a year. He also suggested reducing the consumption of petrol and diesel and minimizing foreign trips. The government is particularly concerned about the situation in the Strait of Hormuz, which could lead to a spike in oil prices and adversely affect India's economy. By curbing gold imports, the government aims to manage the trade deficit and ensure economic stability amidst global geopolitical uncertainties. The record-high import figures of $58-$60 billion in FY2025 underscored the need for these corrective measures to safeguard the national interest.