India’s Gold Tariff Hike Triggers Surge in Smuggling

The government’s attempt to rein in the trade deficit through higher tariffs has backfired, turning the grey market into the primary source for domestic supply. Banks and authorized importers find themselves unable to compete with the illicit discounts, which currently hover above $200 per ounce. This pricing chasm effectively incentivizes tax evasion, as the heavy combined burden of import duties and the goods and services tax makes legal channels prohibitively expensive for many buyers.

Domestic refiners are feeling the immediate sting of this shift. With smuggled gold flooding the market at significantly lower costs, the business of processing raw bullion has become largely uneconomical, leading to domestic discounts exceeding $100 per ounce. Should illegal imports hit the projected 100-ton threshold, the state faces a staggering $2.65 billion shortfall in lost duties and tax revenue, undermining the very fiscal goals the tariff hikes were designed to achieve.