Gold import duty hike will fuel smuggling, not cut imports: GJEPC
Synopsis
India's top gems and jewellery trade body is pushing back hard against the Centre's gold duty hike, warning it will trigger more smuggling, not less. With MSMEs facing ₹28–30 lakh-per-kg bank guarantee demands and export costs rising, the GJEPC is urging PM Modi to consider mobilising India's 25,000-tonne household gold stockpile instead.
Key Takeaways
The Centre raised basic customs duty on gold to 10% from 5% and hiked AIDC to 5% from 1% .
GJEPC warns the hike will fuel gold smuggling and raise export costs, not curb imports.
Exporters must now furnish bank guarantees of ₹28–30 lakh per kg of duty-free gold, blocking working capital.
MSMEs , accounting for 80% of GJEPC membership, face the sharpest impact amid an existing liquidity crunch.
GJEPC has written to PM Modi proposing promotion of 18-karat and 14-karat jewellery to cut imports by 20–30% .
Revival of the Gold Monetisation Scheme proposed to tap India's estimated 25,000 tonnes of household gold.
The Gem and Jewellery Export Promotion Council (GJEPC) on Wednesday, 13 May urged the government to hold consultations with industry stakeholders following the recent hike in gold import duty, warning that higher duties have historically failed to curb imports and instead drive up prices while encouraging smuggling. The council's statement comes after the Centre raised the basic customs duty on gold to 10 per cent from 5 per cent and hiked the Agriculture Infrastructure and Development Cess (AIDC) to 5 per cent from 1 per cent.
Why Higher Duties Miss the Mark
According to the GJEPC, gold import duties have never succeeded in meaningfully reducing demand. The council pointed out that gold prices have nearly doubled in recent years without a proportional decline in consumption, underscoring the inelastic nature of gold demand in India. Critics within the industry argue that duty hikes simply push procurement into grey channels rather than reducing it.
The council warned that higher import duties tend to simultaneously fuel gold smuggling and raise export costs for the domestic jewellery sector — a double blow that undermines the very fiscal objectives the government seeks to achieve.
Impact on Exporters and MSMEs
The duty revision has triggered an immediate working capital crisis for exporters. Under the revised framework, exporters are now required to furnish bank guarantees of nearly ₹28–30 lakh per kilogram of duty-free gold sourced from Nominated Agencies, resulting in a severe blockage of working capital, according to the GJEPC.
The impact is expected to be especially harsh on micro, small and medium enterprises (MSMEs), which account for nearly 80 per cent of the council's membership and are already contending with a liquidity crunch. Industry observers note that MSMEs in jewellery clusters across Surat, Mumbai, and Kolkata operate on thin margins and have limited capacity to absorb sudden cost escalations.
What GJEPC Has Proposed
Acknowledging the government's concerns over rising gold imports, the GJEPC said it has already convened meetings with major retailers and manufacturers and has written to Prime Minister Narendra Modi proposing a range of measures aimed at reducing imports without damaging the industry. Among the key proposals are promoting lower-carat jewellery — specifically 18-karat and 14-karat products — which the council believes could reduce imports by 20–30 per cent.
The council also recommended encouraging old-gold exchange programmes and reviving the Gold Monetisation Scheme to mobilise India's estimated 25,000 tonnes of household gold reserves. A detailed revival proposal for the scheme is being separately prepared and will be submitted to the government shortly.
The Road Ahead
The GJEPC has urged policymakers to engage in structured dialogue with the industry to find sustainable solutions that balance fiscal objectives with export growth. With India being one of the world's largest gold importers and the jewellery sector a significant contributor to export earnings, the outcome of these consultations could have wide-ranging implications for both trade policy and the livelihoods of millions employed in the gems and jewellery value chain.
Point of View
000 tonnes of idle household gold, a domestic reserve that, if mobilised, could reduce import dependency without a single customs notification. The failure to revive the Gold Monetisation Scheme after years of low uptake is a policy gap that deserves more scrutiny than the duty rate itself.
NationPress
6 Aug 2026
Frequently Asked Questions
Why is the GJEPC opposing the gold import duty hike?
The GJEPC argues that higher gold import duties have historically failed to reduce imports, as gold demand in India remains largely inelastic even as prices rise. Instead, the council warns, higher duties encourage smuggling and increase costs for exporters and MSMEs.
What are the new gold import duty rates?
The Centre has raised the basic customs duty on gold to 10 per cent from 5 per cent and increased the Agriculture Infrastructure and Development Cess (AIDC) to 5 per cent from 1 per cent.
How does the duty hike affect jewellery exporters?
Exporters must now furnish bank guarantees of nearly ₹28–30 lakh per kilogram of duty-free gold sourced from Nominated Agencies, causing a severe blockage of working capital. MSMEs, which make up 80% of GJEPC membership, are particularly vulnerable.
What alternatives has the GJEPC proposed to reduce gold imports?
The council has proposed promoting lower-carat jewellery (18-karat and 14-karat), which it estimates could reduce imports by 20–30%, alongside encouraging old-gold exchange programmes and reviving the Gold Monetisation Scheme to mobilise India's 25,000 tonnes of household gold.
What is the Gold Monetisation Scheme and why is it relevant?
The Gold Monetisation Scheme is a government initiative designed to mobilise idle household gold in India — estimated at 25,000 tonnes — into the formal financial system, reducing the need for fresh imports. The GJEPC is preparing a detailed revival proposal to submit to the government.
