Key Takeaways:
Gold in India fell Rs 600 per 10 grams on May 27, with 24-carat trading at Rs 1,58,290, as the government's import duty increase to 15 percent curbed domestic demand.
"The duty hike to 15 percent, effective from May 13, pushed the total tax incidence to 18.45 percent including IGST, making gold the most expensive it has been for Indian consumers," Dr Renisha Chainani, head of research at Augmont, a precious metals trading platform, said. "This is the highest effective duty since the 2022 hike."
In Hyderabad, 22-carat gold dropped Rs 550 to Rs 1,45,100 per 10 grams, while silver fell to Rs 2,90,000 per kilogram, according to local market data. The declines follow a single-session spike of Rs 13,910 on May 13, when 24-carat gold touched Rs 1,67,890 per 10 grams immediately after the duty announcement. India's gold and silver import bill surged 26.7 percent year-on-year to $102.5 billion in FY26, government data shows.
The duty increase — the steepest since the 2022 hike from 10.75 percent to 15 percent — is expected to reduce short-term consumer demand by 10 percent to 15 percent by volume, though import values may stay elevated, according to industry estimates. The government also capped duty-free gold imports under the Advance Authorisation Scheme at 100 kilograms per application and mandated physical inspections for first-time applicants to curb smuggling.
India has repeatedly turned to gold import curbs during external crises. In 2013, the RBI's 80:20 Scheme — requiring 20 percent of imported gold to be re-exported — cut official imports by nearly 70 percent but triggered a surge in smuggling. The 2019 duty hike to 12.5 percent saw imports fall 73 percent year-on-year in August of that year. The 2024 budget slashed duties to 6 percent, the lowest since 2013, which drove a 221 percent surge in imports in August 2024 as smuggling dropped sharply, according to the Central Board of Indirect Taxes and Customs.
Globally, COMEX gold edged lower on Tuesday as Brent crude rebounded after fresh US strikes on Iran, fueling inflation expectations that could keep the Federal Reserve on hold. India's wedding season demand, which typically supports prices through mid-year, has been muted as buyers adjust to the higher tax regime. The next catalyst for domestic prices will be the July import data, which will show whether the duty hike has materially reduced inbound shipments.
This article is for informational purposes only and does not constitute investment advice.
