India has moved most silver imports from “free” to “restricted” status, substantially raising the bar for bringing bullion into the country. In a Directorate General of Foreign Trade notification dated May 16, importers now generally need a government license to import silver — a quick follow-up to a customs duty hike that took effect May 13.
Customs duties on precious metals were raised from 6% to 15% on May 13. After applying the Integrated Goods and Services Tax, the effective tax burden on imported silver now exceeds 18%. That matters: India imported roughly $12 billion of silver in the fiscal year ending March 2026, so the policy change affects a sizable trade flow.
Why the change
Silver import values surged about 150% in FY 2025–26, while volumes rose roughly 42% year over year. Higher global bullion prices combined with a weakening rupee pushed up the rupee cost of imports and increased foreign exchange outflows, widening the current account deficit. The government’s aim with tighter import controls and higher duties is to curb that pressure on the currency and cut the import bill.
Scope and immediate effects
The restrictions are broad but include narrow exemptions for some Export Oriented Units (EOUs) and Special Economic Zones (SEZs). Those exempted entities are not allowed to sell into the domestic market, however, so domestic jewelers and bullion dealers will generally still face the new licensing requirement. Domestic silver prices rose about 7% after the higher duties were announced.
A return to an old playbook, with risks
This is a reversal of a two-year period when tariffs were deliberately reduced to discourage smuggling and support the legitimate jewelry sector. At the time, lower duties were intended to undermine gray markets and help formal traders. With import values ballooning, policymakers appear to have decided that lower rates are no longer appropriate.
But higher legal costs do not eliminate demand. When the landed cost of legally imported silver exceeds 18%, the profit opportunity for smuggling and gray-market channels increases. That raises the risk that the very illegal trade the earlier cuts sought to curtail could strengthen again.
Market and industry implications
For global silver markets, removing or restricting one of the world’s largest sources of demand matters: India has been a market mover, and a $12 billion annual import bill is significant. Reduced legal demand from India could influence global pricing and flows.
For Indian jewelers and bullion dealers, the immediate effect is margin pressure. A roughly 7% rise in domestic wholesale prices does not automatically translate into higher retail prices if consumer demand is price-sensitive, squeezing profitability across the supply chain. Licensing requirements will also add administrative friction and potential delays.
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