Gold at 18% Tax: Understanding the New Import Duty Hike and Its Impact on You

On May 13, 2026, the Indian government increased the import duty on gold and silver. The duty has been raised from 6% to 15% — a combination of 10% basic customs duty and 5% Agriculture Infrastructure and Development Cess — effective immediately. This brings the total tax burden on gold jewellery for end consumers to approximately 18%, including GST.

The move comes as India's foreign exchange reserves have come under pressure from two directions simultaneously. Crude oil prices have surged above $100 per barrel due to the ongoing West Asia conflict, and gold imports hit a record high in FY26. With the rupee hitting an all-time low against the US dollar, the government acted to curb the country's two largest import bills. Prime Minister Modi had flagged the concern three days earlier, publicly urging citizens to avoid buying gold for a year.

This Has Happened Before

India last hiked gold import duty to 15% in July 2022, triggered by the Russia-Ukraine war, widening the country's current account deficit and weakening the rupee — circumstances not unlike today.

Following that hike, gold import volumes fell, and jewellery retailers experienced volume pressure for a couple of quarters before returning to normalcy. The duty remained at 15% for two full years and was cut to 6% in the Union Budget of July 2024.

Inventory Gains for Jewellery Companies

In the near term, listed jewellery companies such as Titan and Kalyan Jewellers will report inventory gains in their upcoming quarterly results.

The reason is straightforward. These companies hold gold inventory that was purchased when the import duty was 6%. Now that duty has moved to 15%, domestic gold prices have risen to reflect the higher import cost. The existing inventory — bought at the old lower cost — will be sold at the new higher market price. The difference flows directly into profits for that quarter.

This is not a new phenomenon. The same mechanism worked in reverse when duty was cut in July 2024. At that time, Titan was holding inventory purchased at 15% duty cost. When domestic gold prices fell after the cut, the company had to sell that stock at lower prices, resulting in inventory losses of ₹290 crore in Q2 FY25 and ₹253 crore in Q3 FY25 — losses the company disclosed separately in its results.

The same accounting logic now works in the other direction. Inventory gains will show up in Q1 FY27 results.

Near-Term Headwinds, Long-Term Story Intact

Higher gold prices resulting from the duty hike will weigh on consumer demand in the near term, particularly for discretionary and wedding jewellery purchases. A higher duty also narrows the price advantage that organised retailers hold over the unorganised market, as grey market supply becomes more competitive when official import costs rise.

However, the long-term structural story for organised jewellery retailers remains intact. India's organised jewellery retail sector has grown its market share significantly over the past decade, driven by hallmarking norms, GST compliance, and consumer preference for trusted brands. These structural drivers do not change with a duty notification. Every previous period of elevated duty has been followed by a reversal, and organised players have historically emerged from such cycles with stronger market positions than when they entered.

The government has historically used import duty as a lever to manage gold's impact on the current account, and the sector has navigated each such cycle. How consumer demand responds in the coming quarters will be the key indicator to watch.