India’s Gold Rush Defies Tax Hike as Imports Surge Despite Steep Duty Increase

The report indicates that gold imports surged ahead of the policy change and remained resilient after the revised duty regime was implemented, highlighting the enduring strength of India’s appetite for gold despite higher taxation.

Trade data cited by GTRI shows that gold imports climbed 81.7 percent year-on-year to $5.63 billion in April 2026, just before the government raised import duties. Following the implementation of the revised duty structure on 13 May 2026, imports continued to increase, rising 34 percent in May to $3.42 billion from $2.55 billion during the same month a year earlier.

Combined gold imports for April and May 2026 reached .04 billion, marking a 60.1 percent increase compared with .65 billion recorded during the corresponding period of the previous year.

The duty hike was introduced through customs notifications issued on 12 May 2026 and took effect the following day. The move reversed a reduction announced in the Union Budget of July 2024, when effective import duties on gold had been cut from 15 percent to 6 percent.

Under the revised framework, the Basic Customs Duty was increased from 5 percent to 10 percent, while the Agriculture Infrastructure and Development Cess was raised from 1 percent to 5 percent. Including the 3 percent Integrated Goods and Services Tax levied on the landed value plus duties, the total effective tax burden on imported gold now stands at approximately 18.4 percent.

Despite the substantial increase in taxation, gold imports rose 24.1 percent to $72 billion during the financial year 2025-26, compared with $58 billion in the financial year 2024-25.

GTRI noted that the sharp rise in imports during April reflected strong buying activity before the duty increase came into force. Although the pace of growth moderated in May, the overall trend continued to indicate robust underlying demand.

According to the report, the resilience in imports has been driven by strong jewellery consumption, increased investor interest in safe-haven assets amid global uncertainty, and elevated international gold prices that have boosted the overall value of imports.

The data suggests that while the higher duties have slowed the growth rate of imports—from 81.7 percent in April to 34 percent in May—they have not substantially weakened demand for the precious metal.

GTRI has warned that persistently high gold imports could continue to place pressure on India’s trade deficit and foreign exchange outflows, particularly amid external uncertainty linked to energy price shocks arising from geopolitical tensions in West Asia.

Country-wise import data for May 2026 is still awaited. Once released, it is expected to reveal whether the higher duties have altered sourcing patterns among major gold suppliers, including the United Arab Emirates, Switzerland, South Africa, and other leading gold-exporting nations.

The latest figures underscore the challenge policymakers face in using taxation as a tool to restrain gold demand. Despite a significant increase in import duties, India’s gold market continues to demonstrate remarkable resilience, raising concerns about its potential impact on trade balances and foreign exchange reserves in an increasingly uncertain global environment.