Dubai may emerge as biggest beneficiary of India’s gold duty hike, warns GTRI

New Delhi: India’s sharp increase in import duties on gold and silver could trigger a surge in bullion shipments routed through Dubai under the free trade agreement framework, according to trade think tank the Global Trade Research Initiative (GTRI).

The warning follows the government’s decision to raise the import duty on precious metals from 6 per cent to 15 per cent, significantly altering the economics of imports under the India-UAE Comprehensive Economic Partnership Agreement (CEPA).

Under the agreement, India permits gold imports from the UAE at tariffs one percentage point lower than the standard Most-Favoured-Nation (MFN) rate through a Tariff Rate Quota (TRQ) mechanism. The quota, introduced in 2022 at 120 tonnes annually, is scheduled to increase to 200 tonnes by 2027 — nearly a quarter of India’s yearly gold imports.

GTRI said the revised tariff regime could make Dubai a more attractive routing hub for global bullion, despite the UAE not being a producer of gold or silver.

“With the new MFN tariff structure taking effective duties to 15 per cent, gold imported under the UAE quota would enter at 14 per cent. The widening tariff gap could encourage greater routing of global bullion through Dubai,” the think tank said.

Silver imports also seen benefiting

The duty differential is even wider for silver. Under CEPA, India agreed to gradually cut import duties on silver from 10 per cent to zero over a ten-year period beginning in May 2022. The concessional tariff on silver imports from the UAE currently stands at 7 per cent.

GTRI founder Ajay Srivastava said the latest tariff hike has created a substantial arbitrage opportunity for imports routed through Dubai.

“With India now raising the general tariff to 15 per cent, the duty gap has widened to eight 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,” he said.

ALSO READ | Gold prices soar: Panic buying and profit-taking grips jewellery markets

Under the previous structure, imports of gold and silver attracted a 5 per cent Basic Customs Duty (BCD) and a 1 per cent Agriculture Infrastructure and Development Cess (AIDC), resulting in a combined levy of 6 per cent. Including the 3 per cent Integrated GST (IGST), the effective import duty stood at 9.18 per cent.

The revised regime doubles the BCD to 10 per cent and raises the AIDC from 1 per cent to 5 per cent, pushing the combined customs levy to 15 per cent. With IGST included, the effective import duty has climbed to 18.45 per cent.

Call to simplify customs notifications

The move comes amid a sharp rise in precious metal imports. In FY2025-26, India imported nearly USD 72 billion worth of gold, around 25 per cent more than the previous year. Silver imports also recorded a steep jump, rising 150 per cent year-on-year.

GTRI also urged the Finance Ministry to simplify the wording of customs notifications linked to tariff changes, arguing that the current system is excessively complex.

ALSO READ | Gold price shock ahead: How much more will jewellery cost after duty hike?

According to the think tank, importers and legal advisers are often required to trace amendments and references across customs notifications issued over the past 26 years to determine the applicable duty rates.

(PTI)