The Government Just Tightened India’s Gold Import Rules — Here’s What Changed and Why It Matters
May 15, 2026
Gold has always been India’s weakness. We love it, we hoard it, we buy it for every occasion from weddings to Dhanteras, and the numbers show it — India’s gold imports surged more than 24 percent to an all-time high of USD 71.98 billion in 2025-26. That’s an enormous amount of foreign exchange walking out the door in the form of yellow metal.
The government has apparently had enough. In the span of just two days, it has fired two consecutive shots at gold imports — first by sharply hiking customs duties, then by clamping down on the duty-free import loophole that exporters were using. And if you follow the jewellery trade, or simply wonder why the government is suddenly so anxious about gold, both moves make a lot more sense when you understand what’s happening to the rupee and the wider economy.
What Exactly Did the Government Do?
On May 14, 2026, the Directorate General of Foreign Trade (DGFT) issued a public notice tightening the rules under something called the Advance Authorisation (AA) scheme — a scheme that allows jewellery exporters to import gold without paying customs duty, on the condition that the gold is used to make products for export.
Sounds reasonable in theory. Import gold duty-free, turn it into beautiful jewellery, sell it abroad, earn foreign exchange. Everyone wins.
The problem is that not everyone was playing by those rules.
Here’s what the DGFT has now done:
1. A hard cap of 100 kg per authorisation. Previously, there was no quantitative limit on how much gold an exporter could import duty-free under a single authorisation. Now there is. The DGFT’s public notice states clearly: “Advance Authorisation for import of gold shall be issued, subject to a maximum permissible quantity limit of 100 kilograms.” That ceiling didn’t exist before.
2. First-time applicants must face a physical inspection. If you’re applying for the scheme for the first time, officials from the DGFT’s regional office will now physically visit your manufacturing facility before approving your licence — checking whether your unit actually exists, what its production capacity is, and whether it is genuinely operational. This might sound obvious, but the fact that it wasn’t happening before says a lot.
3. You must prove you exported before you import again. Fresh authorisations for gold imports will only be issued after an exporter has fulfilled at least 50 percent of their export obligations from the previous licence. In plain language: you have to show you actually used the earlier gold for exports before we give you more duty-free gold.
4. Fortnightly performance reports, certified by a CA. Authorisation holders will now have to submit progress reports every two weeks, signed off by an independent chartered accountant, detailing exactly how much gold was imported and how much was exported.
5. Monthly oversight reports from regional offices. DGFT regional authorities have been directed to send monthly consolidated reports to headquarters. The government is essentially building a paper trail from multiple directions at once.
But Wait — There Was Also a Duty Hike the Day Before
The AA scheme crackdown didn’t come out of nowhere. A day earlier, on May 13, the government had already made a dramatic move: it raised import duties on gold and silver from 6% to 15% — effectively more than doubling the cost of importing gold through normal channels.
The basic customs duty on gold was doubled to 10 percent, and the agriculture infrastructure and development cess (AIDC) was hiked fivefold from 1 percent to 5 percent. Add in the 3 percent GST, and the total effective duty on gold imports is now 18.45 percent, up from around 9.18 percent earlier. Duties on platinum were also raised, from 6.4 percent to 15.4 percent.
This is significant. And the timing of the AA scheme tightening is not accidental. Here’s why: when the government raised customs duty on normal gold imports so sharply, it created an immediate and powerful incentive for traders to rush large quantities of gold through the Advance Authorisation scheme — the duty-free route — before the loophole was plugged.
As sources within the government acknowledged, there was “a strong possibility of the scheme being misused to import large quantities of gold immediately after the import duty hike and benefit from price arbitrage.” The 100 kg cap and the stricter monitoring are the government’s way of shutting that window before traders could exploit it.
Why Is the Government This Worried About Gold?
The rupee hit a record low of 95.75 against the US dollar on May 12 — the day before the duty hike was announced. It recovered some ground after the announcement, which tells you how directly the market connects gold import curbs with currency stability.
India is the world’s second-largest consumer of gold after China, and importing so much of it — especially during a period of global economic uncertainty — puts immense pressure on the country’s foreign exchange reserves and the trade deficit. Every billion dollars spent on gold imports is a billion dollars that isn’t available for oil, semiconductors, defence equipment, or anything else the country genuinely needs.
The broader context makes this even more urgent. The Iran-US war has sent global energy prices soaring. India’s import bill is already swollen because of expensive crude oil. At exactly this moment, gold imports hitting an all-time high is the last thing the government wants to be managing.
PM Modi had already made his views clear publicly — he urged citizens to reduce gold purchases and channel savings towards more productive investments. The DGFT’s moves are the policy machinery following through on that message.
What Does This Mean for the Jewellery Industry?
India’s gems and jewellery sector is one of the country’s major export earners, employing millions of artisans and workers, particularly in cities like Surat, Mumbai, Jaipur, and Chennai. Legitimate exporters who were genuinely importing gold duty-free and turning it into exported jewellery will now face more paperwork, inspections, and a per-authorisation import ceiling.
The 100 kg cap is likely to hit larger exporters who might have previously processed gold in bulk. They’ll now need multiple authorisations, each with its own compliance trail.
The physical inspection requirement for first-time applicants adds a layer of friction that, honestly, should have existed all along. Shell companies or paper entities pretending to be exporters would find it far harder to operate.
Industry bodies will undoubtedly push back and argue that genuine exporters are being penalised for the misuse of others. That’s a fair concern. But the government’s calculation is clearly that the alternative — allowing the loophole to stay open while the rupee bleeds — is worse.
The Bigger Picture
Put it all together and what you see is a government trying to manage multiple crises simultaneously. A weakening rupee. A trade deficit inflated by both oil and gold. A war-driven energy shock eating into foreign exchange. And a population with an almost cultural compulsion to buy gold.
The duty hike addresses the demand side — making gold more expensive reduces (some) buying. The AA scheme tightening addresses the supply-side loophole — ensuring duty-free gold actually goes to exports, not back into the domestic market. And PM Modi’s appeal to citizens is the soft-power layer on top of it all.
Whether it works depends on enforcement — something India has historically struggled with on import rules. The new monitoring architecture, with CAs certifying fortnightly reports and regional offices reporting upward monthly, at least signals that the government is serious about follow-through this time.
One thing is clear though: the era of treating gold imports as a minor inconvenience to be quietly routed around is over. At least for now.
Note: The new DGFT rules under the Advance Authorisation scheme came into effect via a public notice dated May 14, 2026. The import duty changes on gold and silver came into effect from May 13, 2026.
