India's Precious Metals Duty Hike Widens Dubai Arbitrage

India has sharply raised Customs duties on gold and silver from 6% to 15%. Total import tariffs including 3% GST will double from 9.18% to 18.45%. Under the earlier regime, imports of gold and silver products attracted a 5% Basic Customs Duty and a 1% Agriculture Infrastructure and Development Cess, taking the total customs levy to 6%. After adding 3% Integrated GST, the effective total import duty worked out to 9.18%.

The revised structure doubles the BCD from 5% to 10% and raises the AIDC five-fold from 1% to 5%. The combined customs levy has therefore jumped from 6% to 15%. Including IGST, the effective import duty has surged from 9.18% to 18.45%.

In practical terms, imported bullion worth ₹100 earlier entered India with a tax burden of about ₹9.18. The same shipment will now attract roughly ₹18.45 in taxes — an increase of more than 100% in the effective import duty burden.

The move comes amid a surge in precious metal imports. In 2025-26, India imported nearly $72 billion worth of gold, around 25% higher than the previous year. Silver imports crossed $12 billion, recording an extraordinary 150% annual increase.

The UAE FTA Angle
The tariff increase also sharply changes the economics of precious metal imports routed through the United Arab Emirates under the India-UAE Comprehensive Economic Partnership Agreement.

Under the CEPA, India had agreed to gradually reduce import duties on silver from 10% to zero over a ten-year period beginning in May 2022. The concessional tariff on silver imports from the UAE currently stands at 7%. With India now raising the general tariff to 15%, the duty gap has widened to 8 percentage points, creating a major arbitrage opportunity for imports routed through Dubai. That margin is scheduled to widen further each year until CEPA tariffs fall to zero by 2031.

Gold imports from the UAE also enjoy preferential access under the agreement. India had allowed imports of gold from Dubai at tariffs one percentage point below the normal Most-Favoured-Nation rate through a Tariff Rate Quota system. The quota began at 120 tonnes annually in 2022 and is set to rise to 200 tonnes by 2027 — nearly one-fourth of India’s yearly gold imports. With the new MFN tariff structure taking effective duties to 15%, gold imported under the UAE quota would enter at 14%.

The widening tariff gap could encourage greater routing of global bullion through Dubai, even though the UAE is not a miner of gold or silver.

Communication Strategy
The three May 12 notifications notifying tariff changes extremely difficult to understand. They force importers, lawyers and consultants to trace references to customs notifications issued over the past 26 years. In some cases, the serial numbers mentioned in the new notifications do not match the older notifications they refer to, making interpretation difficult even for specialists. Determining the actual applicable duty now requires going through multiple layers of amendments, corrections and tariff changes issued over several decades.