A sharp increase in India's gold import duty to 15% has triggered a surge in smuggling, with illegally imported gold from the Middle East selling at a discount of ₹8-10 lakh per kg to official market prices. For overseas jewelry buyers and supply-chain partners, this signals potential disruptions in legitimate gold sourcing, price volatility, and heightened compliance risks when trading with Indian buyers or sourcing from the region.
Duty hike fuels grey-market activity
India raised its gold import duty to 15% from 6% in recent weeks, reviving a pattern seen after the 2013 hike when unofficial imports jumped seven-fold within a year. Bullion dealers report that smuggled gold, often carried by passengers from Gulf nations, bypasses the 15% duty and 3% GST, giving sellers an immediate margin of ₹16 lakh per kg after offering a discount of ₹8-9 lakh to jewellers.
Key smuggling routes and volumes
Most smuggled gold enters India via airports from the Gulf, Bangladesh, and Nepal, concentrated in Maharashtra, Tamil Nadu, Gujarat, and West Bengal. On June 1, customs at Mumbai airport seized gold worth over ₹4.19 crore from two Dubai arrivals. The World Gold Council notes that once smuggling networks form, they persist even when duties stabilize, averaging 34 tonnes per quarter during the 10% duty period from 2013 to 2019.
What buyers should watch
Overseas jewelry importers and OEM buyers should monitor India's gold price differentials and customs enforcement trends. A sustained grey market could distort official gold prices, affect the cost of finished jewelry exports from India, and increase the risk of counterfeit or untraceable gold entering supply chains. Buyers sourcing from India should verify suppliers' compliance with BIS hallmarking and import documentation.
Compliance and logistics signals
Indian customs have intensified airport seizures, but the scale of smuggling may rise further as the duty gap persists. The 2013 precedent suggests unofficial inflows could reach 70 tonnes per quarter within a year. For trading companies and private-label brands, this environment raises the importance of due diligence on bullion sources and may push legitimate importers to seek alternative gold supply routes or hedging strategies.
Source: Read the original report | Published: June 02, 2026