The Indian government is evaluating a reduction in the 15% import duty on gold and silver, which has been in place since May 2026. This review aims to address rising illegal trade, which currently undermines the market share of organized jewellery retailers and disrupts industrial input costs.
Since May 13, 2026, the Indian government has maintained a 15% import duty on gold and silver. This tax was originally introduced to stabilize the rupee and conserve foreign exchange reserves during a period of geopolitical pressure. Now, the government is considering a potential rollback, as the high duty structure has inadvertently fueled an increase in illegal gold and silver trade.
Impact on Organized Jewellery Retail
For organized jewellery companies, the high duty creates a difficult business environment. When import taxes remain high, the price gap between official gold and gold sold through unauthorized channels widens. This makes it challenging for formal retailers—such as Titan, Kalyan Jewellers, and others—to compete on price with illegal or gray market operators. If the government reduces the duty, it could help narrow this price gap, potentially supporting volume growth for formal retailers who rely on legal, tracked supplies of gold.
Industrial Costs for Silver Users
Silver is more than just a precious metal; it is a critical raw material for several high-growth industries, including solar energy infrastructure and electronics manufacturing. The current 15% duty adds significantly to the production costs for these sectors. Manufacturers in these fields often face thinner margins compared to bullion traders, as they cannot easily pass on inflated raw material costs to customers. A reduction in duties would act as a relief for these industrial users, lowering the cost of production and supporting domestic manufacturing competitiveness.
The Balancing Act
The decision to roll back duties involves a complex trade-off for the government. While lowering the tariff could curb smuggling and bring more trade into the formal economy, authorities must also consider the original goal of the tax: preserving foreign exchange reserves and managing the current account deficit. The government is currently weighing the revenue benefits of higher taxes against the long-term risk of a growing parallel economy that bypasses official tax channels entirely.
Investors should track upcoming official notifications from the Central Board of Indirect Taxes and Customs regarding any change in duty rates. The primary monitorable will be whether a reduction is implemented and how it impacts the pricing power and volume growth of major listed jewellery retailers in the coming quarters.