Industry officials cautioned that the tax hike could lead to a resurgence in smuggling activity.
India sharply increased the import duty on gold and silver to 15% from 6%, effective Wednesday (May 13, 2026), in an effort to cool rising demand for precious metals, reduce pressure on its widening trade deficit, and support the rupee, which has been hovering near record lows.
Bloomberg reported that the decision is part of broader measures to curb overseas purchases and ease pressure on the country’s foreign exchange reserves.
The higher duties could dampen demand in the world’s second-largest consumer of precious metals, while potentially helping to narrow India’s trade deficit and support the rupee, one of Asia’s weakest-performing currencies.
Revised levy:
The updated import duty consists of a 10% basic customs duty and a 5% Agriculture Infrastructure and Development Cess (AIDC), raising the effective tax rate to 15% from 6%.
The policy shift comes at a time when the rupee has been under sustained pressure, weighed down by global uncertainty and elevated commodity imports.
Shortly after the announcement, the currency posted a modest recovery against the dollar, trading at 95.61 on May 13 after falling to historic lows in previous sessions.
Analysts expect the higher duties to quickly feed into domestic prices for gold and silver, potentially dampening consumer demand in the world’s second-largest gold market.
Gold smuggling
However, some market watchers warned that steeper taxes could also revive smuggling activity, a persistent challenge whenever official import costs rise sharply.
The decision also comes amid escalating tensions in the Middle East, which have fueled safe-haven buying of gold globally.
Prime Minister Narendra Modi had earlier called for efforts to reduce gold imports to conserve foreign exchange reserves, a stance that now appears to have translated into decisive policy action.
