Gold import duty hike fuels surge in illegal smuggling, driving Rs 8,000 per 10g discounts
After the government raised gold import duty to 15%, smuggled gold is being sold up to Rs 8,000 cheaper per 10 grams, with industry estimates warning that more than 100 tonnes could enter India this year.
India's gold market is feeling the impact of a duty hike that lifted the import tax from 6% to 15% in May, prompting a sharp rise in grey-market activity. Smuggled gold is being sold at discounts as high as Rs 8,000 per 10 grams, according to industry sources. The Directorate of Revenue Intelligence has stepped up raids, confiscating more than 27 kg of foreign-origin gold and detaining 12 individuals.
Estimates suggest that illegal imports may top 100 tonnes this year, a level not seen since earlier spikes after duty increases. Representatives from the India Bullion & Jewellers Association and the All India Gem & Jewellery Domestic Council warn that the illicit trade harms organized dealers and calls for a reduction of the duty to 5%. The World Gold Council notes that higher duties historically widen the domestic-international price gap, encouraging smuggling.
Why it matters
Higher gold duties are driving a large illegal market, affecting prices, traders and foreign-exchange reserves.
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