India’s sharp increase in gold
import tariffs is fuelling a resurgence in smuggling that could
exceed 100 metric tonne this year, as soaring grey market margins
allow smugglers to undercut banks and refiners of the precious
metal, industry officials and bullion dealers said.
India, the world’s biggest gold market after China, more than
doubled import tariffs to 15 per cent in May to curb demand, cut the
trade deficit and ease pressure on the rupee. But the move has
created an opportunity for smugglers who are able to offer
prices legitimate importers cannot match, they said.
The grey market discount has gone beyond $200 per ounce, or more
than 4 per cent, said a Mumbai-based bullion division head at a private
gold importing bank, adding that banks were unable to offer even
a $10 discount, let alone one of three digits. He declined to be
named because he was not authorised to speak to media.
The recent resurgence in the grey market suggests illegal
imports could exceed 100 tons in 2026, said another dealer who
also declined to be identified because he was not authorised to
speak to the media.
Four other dealers interviewed by Reuters shared the view
that illegal gold imports could exceed 100 tonne in 2026.
At current prices, 100 tonne of gold would be worth about
$14.35 billion, implying roughly $2.65 billion in lost tariffs
and sales tax.
Smugglers can offer steep discounts because they do not pay
taxes on gold, including import tariffs and goods and services
tax that total 18.45 per cent, the bullion dealers said.
“There’s a margin of more than 2.5 million rupees ($26,121.25)
on bringing in a one-kilo bar, which is roughly the size of an
iPhone. It is natural that people will try to make quick bucks,”
the second dealer said.
“Even if grey-market operators sell at a 4 per cent discount, they are
still making a killing,” said a Kolkata-based bullion dealer.
SMUGGLING TARNISHES LEGAL MARKET
Gold smuggling fell from 156.1 tonne in 2023 to 69.2 metric tons
the following year, and declined further in 2025 to 20.4 tonne
after India cut import duties on gold.
Before the duty cut, an average of 108 metric tonne of the
precious metal was smuggled into the country each year over the
previous decade, according to data compiled by the World Gold
Council.
India imported 45.6 tonne of gold in April, but imports may
have halved in May as banks and refiners scaled back overseas
purchases amid deep discounts, said a Hyderabad-based bullion
dealer.
Hefty discounts in the grey market have disrupted legal trade,
pushing domestic discounts on legal gold to more than $100 an
ounce as stocks imported before the duty hike are sold at steep
discounts, making refining uneconomical, said James Jose,
managing director of refiner CGR Metalloys.
New Delhi levies a 0.65 per cent lower import duty on gold dore, a
semi-pure alloy, than on refined gold, but the alloy has also
been affected by the tariff change.
“Gold refiners typically operate on margins of around 0.65%.
With discounts now well above that level, refiners have little
incentive to import dore,” Jose said.
Published on June 9, 2026
