Gold Import Policy in India

India is one of the two largest buyers of gold in the world, along with China. But India mines very little gold of its own. So almost all the gold Indians buy for weddings, festivals and savings comes from abroad. Gold import policy is the set of rules the government uses to decide who can import gold, how much tax is paid on it, and how to reduce the country's need to import it.

Why does India need a gold policy?

Gold is bought with US dollars. When Indians buy a lot of gold, India sends a lot of dollars abroad. This widens the gap between what India pays to the world and what it earns, called the current account deficit. It also pushes the rupee down and uses up foreign exchange reserves. And unlike machines or factories, gold kept in a locker does not produce more goods or jobs.

Economists call it an "unproductive" asset for the economy as a whole. So the government tries to balance two things: people's deep love for gold, and the country's need to protect its dollars.

Where did it come from? A short history

• Gold control era (1962 to 1990): After the 1962 war with China, the government brought in strict gold control rules. The Gold (Control) Act, 1968 limited how much gold people and goldsmiths could hold. Instead of reducing demand, it pushed gold trade into smuggling. The Act was repealed on 6 June 1990.
• The 1991 crisis: India ran so short of dollars that it pledged about 67 tonnes of its gold with foreign banks (the Union Bank of Switzerland, the Bank of England and the Bank of Japan) to raise emergency money. This event made gold a symbol of India's balance of payments weakness.
• Opening up (1990s): In 1992, Indians returning from abroad were allowed to bring in gold as baggage. In 1994, gold imports were allowed through a Special Import Licence. In 1997, public sector agencies such as MMTC, STC, PEC and HHEC, and seven banks named by the RBI, were allowed to import gold. This is the start of the "nominated agency" system.
• The 2013 squeeze: With a very high current account deficit, the government raised import duty and the RBI brought in the 80:20 rule. Under it, at least 20% of imported gold had to be exported before more could be imported. It raised gold premiums and smuggling, and the RBI withdrew it on 28 November 2014.
• 2015 schemes to reduce imports: The Gold Monetisation Scheme (GMS) and Sovereign Gold Bond (SGB) Scheme were launched in November 2015 to put household gold to use and to give people a paper alternative to physical gold.

How does gold come into India today? Who can import?

Gold is a "restricted" import. This means only approved importers can bring it in. In May 2025, the Directorate General of Foreign Trade (DGFT) tightened the rules for high-purity gold, silver and platinum. Gold can be imported mainly by:

1. Nominated agencies notified by the DGFT, which are public sector trading bodies such as MMTC Ltd, MSTC Ltd, PEC Ltd and the Handicraft and Handlooms Exports Corporation (HHEC).
2. Banks authorised by the RBI to import gold (some are allowed to import silver too).
3. Qualified jewellers notified by the International Financial Services Centres Authority (IFSCA), who buy through the India International Bullion Exchange (IIBX) at GIFT City, Gujarat. IIBX is India's first bullion exchange, launched on 29 July 2022.
4. Holders of a tariff-rate quota (TRQ) under the India-UAE Comprehensive Economic Partnership Agreement (CEPA), 2022, who can import a fixed quantity at a lower duty.
5. Licensed refineries, which can import gold doré (partly refined gold) for refining.

Banks and agencies then sell this gold to jewellers and traders, or supply it to jewellery exporters.

The tax layers on imported gold

When gold arrives, the importer usually pays three things:

• Basic Customs Duty (BCD): a tax on goods coming into India.
• Agriculture Infrastructure and Development Cess (AIDC): an extra charge collected with customs duty.
• IGST of 3%: the GST charged on imports, calculated on the value of the gold plus the customs duty.

Duty levels have swung many times. In the July 2024 Budget, the total duty on gold was cut from 15% to 6% (BCD from 10% to 5%, AIDC from 5% to 1%) to reduce smuggling. From 13 May 2026, it was raised back to about 15% (BCD at 10% plus AIDC), to reduce imports and support the rupee.

A simple way to think about it: higher duty is like a higher toll at the gate. It discourages imports, but if the toll is too high, people try to sneak around the gate through smuggling.

The IGST exemption for banks and nominated agencies

When GST began on 1 July 2017, banks and agencies first had to pay IGST on imported gold, which raised their costs. In October 2017, a customs notification (No. 77/2017-Customs, dated 13 October 2017) exempted gold imported by specified banks and public sector agencies from IGST. The idea was to keep the canalised supply chain running smoothly. These bodies collect GST later, when they sell the gold within India, so the government still gets tax, just at a later stage.

India's position in numbers

• In 2025-26, India's gold import bill hit a record $71.98 billion, up about 24% from the year before, even though the quantity fell to about 721 tonnes from about 757 tonnes. The value rose mainly because world gold prices rose.
• Switzerland and the UAE are among India's main sources of gold.
• Gold and silver imports are a big reason for India's large merchandise trade deficit.

Commonly confused concepts

• Customs duty vs IGST on imports: Customs duty (BCD plus cess) is a tax for crossing the border; it stays with the government as a cost. IGST is a GST that the buyer can usually claim back as input tax credit later. So removing an IGST exemption mainly raises working capital needs, while raising customs duty raises the final cost directly.
• Gold Monetisation Scheme vs Sovereign Gold Bond: GMS lets people deposit the physical gold they already own with banks and earn interest. SGBs were government bonds priced in grams of gold, so people did not need physical gold at all. The medium and long-term deposits under GMS were stopped from 26 March 2025, and no new SGB issue has come since February 2024.
• Canalisation vs ban: Canalisation means imports are allowed only through chosen channels. It is not a ban; anyone can still buy gold, but only approved bodies can bring it from abroad.
• Nominated agency vs nominated bank: Nominated agencies are notified by the DGFT; nominated banks are authorised by the RBI.

Issues, criticism and the way forward

• Smuggling: High duties widen the price gap between Indian and foreign gold, which rewards smugglers. This was seen after 2013, and was a reason for the 2024 duty cut.
• Hurts jewellery exports: India is a major exporter of gems and jewellery. Costlier inputs can hurt exporters, though special schemes allow duty-free gold for export production.
• Demand is cultural, not just economic: Indians see gold as safe savings, wedding wealth and protection against inflation. Policies that only raise prices may not cut demand much.
• Idle household gold: Indian households hold large amounts of gold that do not earn anything for the economy. GMS tried to bring it into use, but people were slow to deposit jewellery.
• Way forward suggested by experts: build trusted paper and digital gold products (like gold exchange-traded funds and electronic gold receipts), deepen IIBX as a transparent import channel, keep duties at a level that does not feed smuggling, and boost financial savings options so fewer people need to save in physical gold.

Concepts to Know

• Current account deficit (CAD): When a country pays more to the world for imports and other items than it earns from exports and other items over a period. It must be funded by foreign investment or loans.
• Foreign exchange reserves: The dollars, other foreign currencies and gold held by the RBI, used to pay for imports in a crisis and to steady the rupee.
• Bullion: Gold or silver in bulk form, like bars, ingots or coins, valued by weight and purity rather than design.
• Working capital: Money a business needs for its daily operations, such as buying stock before selling it.
• Input tax credit: Under GST, a business can subtract the GST it paid on its purchases from the GST it collects on its sales, so tax is not paid twice.
• Tariff-rate quota (TRQ): A fixed quantity of a product that can be imported at a lower duty; anything above that quantity pays the normal duty.
• Gold doré: Partly purified gold bars from mines, which are refined further to make pure gold.