India's Gold Imports Plummet to 30-Year Low Amid Tax Dispute
Significant Decline in Gold Imports
In April, India's gold imports fell to their lowest level in nearly three decades, with only about 15 metric tons entering the country. This sharp decline is primarily attributed to a tax-related dispute that has disrupted the supply of gold. Traditionally, banks are the main importers of gold in India, but this time they have significantly reduced their imports.
Customs Department's New Tax Demand
The Customs Department has unexpectedly started demanding a 3% Integrated Goods and Services Tax (IGST) on gold imports. Experts in the industry note that when IGST was introduced in 2017, banks were exempt from this tax. However, the sudden enforcement of this tax has left banks confused, leading them to halt the clearance of gold shipments from customs.
Minimal Gold Clearance in April
According to media reports, banks cleared almost no gold from customs in April. While a small quantity did arrive through the India International Bullion Exchange, it was negligible. In contrast, India imported around 35 tons of gold in April 2025, and the average monthly import during the 2025-26 fiscal year was about 60 tons. Thus, this month's figure of 15 tons is alarmingly low.
Gold Stuck in Customs
Reports indicate that India imported approximately $1.3 billion worth of gold in April, a significant drop from last year's average of $6 billion per month. A bullion dealer in Mumbai mentioned that banks had pre-ordered gold in anticipation of Akshaya Tritiya, a significant festival for gold purchases, but much of it remains stuck in customs and vaults. It is estimated that around 8 tons of gold is still held in vaults.
Government's Strategy Behind the Move
Experts suggest that this government action may aim to reduce the trade deficit and strengthen the Indian rupee. The rupee has been among the weaker currencies in Asia this year, prompting efforts to limit gold imports. Additionally, the import of semi-finished gold has also been affected, as refiners are facing challenges in obtaining new import licenses.
Potential Market Impact
While jewelers are attempting to purchase gold through IIBX, the quantities available are insufficient to meet market demand. Overall, the tax dispute and delays in government processes have severely impacted gold imports in India, which could have repercussions for the market and prices in the near future.