India has implemented a hike in import tariffs on gold and silver to 15% from previous rates of 12.5% and 10.75%, respectively, effective immediately. The policy shift, reported by Reuters, is aimed at curbing imports, managing the trade deficit, and stabilizing the rupee. Simultaneously, Indian banks have resumed gold and silver imports after a month-long halt, agreeing to pay a 3% integrated goods and services tax (IGST) that had previously been exempted.
The disruption began on April 1 when customs authorities started demanding that banks pay the IGST on imported bullion. Banks, which handle the majority of India’s refined gold imports, stopped shipments awaiting an annual exemption order. After the government signalled a desire to reduce gold imports, banks began clearing shipments by paying the levy. By mid-May, around 9 metric tons of gold and 34 metric tons of silver had been cleared, according to a government official.
The tariff increase is expected to raise domestic gold prices and dampen consumer demand, particularly during the ongoing wedding season. Prime Minister Narendra Modi had earlier urged citizens to avoid gold purchases to preserve foreign exchange reserves. April gold imports plummeted to a near 30-year low of approximately 15 metric tons due to the disruption. While supplies are improving, demand remains weak, with dealers offering discounts of up to $17 an ounce over official domestic prices.
