India’s gold import dynamics saw a shift in FY2025 following a sharp reduction in import duty from 15% to 6%, effective July 24, 2024. According to a report released by ICRA, official gold bullion imports rose by 8% during the year despite flat overall demand at 782 tonnes, compared to 774 tonnes in FY2024. This suggests a decline in unofficial gold inflows.

The import duty rate cut on gold from 15 per cent to 6 per cent has seemingly brought down unofficial gold imports, as evident from an increase in official gold bullion imports by 8 per cent in FY2025 despite the overall demand remaining flat (sales of 782 tonnes of gold jewellery/ bullion/ bars in FY2025 as against 774 tonnes in FY2024), according to a report released by ICRA today.

On the flip side, the sharp correction in prices after the duty cut resulted in short-term inventory loss, the rating agency said.

Duty action on gold has a considerable influence on the country’s current account position. Increasing import duties on gold can reduce gold imports and help lower the current account deficit, and vice versa.

The actions in the past largely involved revisions in import duty rates. With the introduction of the Goods and Services Tax (GST) in 2017, the overall duty/tax rate increased to 13 per cent from 12 per cent. Major action was undertaken in the Union Budget 2023, wherein the total customs duty was increased by 425 basis points. In the Union Budget 2025, total customs duty on the import of gold was reduced by 900 basis points (6 per cent from 15 per cent) with effect from July 24, 2024. For gold ore, the revised rate was 5.35 per cent (down from 14.35 per cent). The revised duty rates are the lowest in the past decade. Platinum and silver bars also witnessed a similar duty cut of 900 basis points to 6.4 per cent and 6.0 per cent, respectively.

The sharp reduction in import duty rates resulted in a decline in gold prices in the domestic market and, consequently, the landed cost. The demand of gold jewellery improved to some extent immediately after the duty cut due to reduced gold prices. However, gold prices continued to rise subsequently on the back of geo-political tensions and apprehension of tariff imposition by the US, partially offsetting the impact of the duty cut on gold prices, the ICRA report added.