Gold holds a special place in India-not just in temples and households, but also in the nation's economy. India is the second-largest consumer of gold in the world, with demand driven by weddings, festivals, and investments. However, what many buyers don't realize is that the gold price they pay at jewellery shops is directly influenced by gold import duty.

Since India imports the majority of its gold, changes in customs duty, GST, and other levies play a big role in determining how much a consumer pays per gram. In this article, we will explore the gold import duty in India, its recent changes, and how it impacts gold prices.

Why Does India Levy Import Duty on Gold?

India imports over 800–900 tonnes of gold annually, making gold one of the top contributors to the country's import bill. Since gold does not generate direct economic output, high imports often widen the current account deficit (CAD) and put pressure on the Indian rupee.

To manage this, the government imposes customs duty on imported gold. This serves two main purposes:

• Control demand for gold imports.
• Generate revenue for the government.

Current Gold Import Duty Structure (as of 2025)

Gold imports attract multiple layers of duty and taxes:

• Basic Customs Duty (BCD): The core duty imposed on imported gold.
• Agriculture Infrastructure Development Cess (AIDC): Additional cess levied to support rural infrastructure.
• GST (Goods & Services Tax): 3% GST is charged when the imported gold is sold to consumers in India.

👉 For example, if the international price of gold is ₹5,000 per gram:

• Basic Customs Duty (say 10%) = ₹500
• AIDC (say 5%) = ₹250
• Subtotal = ₹5,750
• Add 3% GST = ₹172.5
• Final consumer price = ₹5,922.5 per gram (excluding making charges and jeweller margins)

This is why gold prices in India are always higher than international prices.

Impact of Import Duty on Gold Prices

1. Direct Increase in Gold Rates

Any hike in import duty immediately raises gold prices in India. For example, when the government increased customs duty in 2022, domestic prices jumped overnight, making gold jewellery more expensive for buyers.

2. Boost to Smuggling

High duties often lead to illegal gold inflows through smuggling. According to industry reports, gold smuggling in India rises whenever the duty gap between international and domestic prices widens.

3. Consumer Behavior

When duty is high, consumers may postpone jewellery purchases or shift to lighter jewellery designs.

Some investors prefer digital gold, gold ETFs, or sovereign gold bonds (SGBs) since these are linked to international prices and are not directly affected by customs duty.

4. Jewellery Industry Impact

Higher import duties increase raw material costs for jewellers, which may reduce demand. Many jewellers lobby for lower duties to keep gold affordable during peak demand seasons like weddings and festivals.

5. Investment Decisions

Gold investors in India track import duty changes closely. A lower duty often results in slightly reduced domestic prices, making it an attractive time to buy gold.

Historical Changes in Gold Import Duty

• 2013: Import duty was hiked to 10% to control CAD.
• 2019: Duty was further increased to 12.5%.
• 2021: Government reduced duty to 7.5% (plus cess) to curb smuggling.
• 2022: Duty increased again to 12.5% amid rising imports.

These fluctuations show how the government uses gold import duty as a tool to balance trade and revenue needs.

Why Import Duty Matters for Consumers

For Indian households, gold is not just jewellery-it is an asset, investment, and financial security. Even small changes in duty can impact:

• Wedding Budgets: Since Indian weddings involve heavy jewellery purchases, a higher duty can push costs significantly higher.
• Festival Buying: Demand peaks during Akshaya Tritiya, Dhanteras, and Diwali. A higher duty during these times can dampen festive buying sentiment.
• Investment Returns: Since Indian gold prices include duty, investors may earn lower returns compared to international benchmarks if duty remains high.

Future Outlook

With India's gold demand consistently strong, the government is expected to continue tweaking import duty rates depending on:

• Global gold prices
• Domestic demand
• Rupee-dollar exchange rates
• Current account deficit levels

Experts suggest that instead of very high duties, a balanced duty structure would help reduce smuggling, stabilize prices, and keep consumer demand healthy.

Conclusion

Gold import duty in India plays a crucial role in determining how much consumers pay for gold jewellery, coins, and bars. While it helps the government manage trade balances and generate revenue, higher duties make gold more expensive, encourage smuggling, and impact jewellery demand.

For consumers, understanding the duty structure is essential because it directly affects wedding purchases, festive shopping, and investment decisions. Whether you are buying gold for cultural reasons or as an investment, keeping an eye on import duty announcements in the Union Budget can help you make smarter choices.