The central government is working to rectify a technical oversight in a recent notification that inadvertently withdrew a long-standing tax exemption for gold-importing banks, as per India Bullion and Jewellers Association (IBJA). Government officials are working on a “rectification order” to be issued within the next 48 to 72 hours, Surendra Mehta, National Secretary, IBJA, told ET Online.
Meanwhile, importing banks have resumed operations to keep the supply flowing. Rather than waiting for the government’s amendment, banks began clearing gold shipments on Wednesday by paying the 3% IGST (integrated goods and services tax) upfront, ensuring that jewelry manufacturers and retailers have access to the metal they need.
“All importing banks have resumed clearing gold shipments as of yesterday by paying the 3% IGST. We understand the Commerce Ministry is working to rectify the current notification within the next 2-3 days to restore the previous tax-exempt status for bank imports,” said Mehta.
The temporary freeze had already started hurting the small jewellers.
Without bank shipments, the cost of sourcing gold jumped by as much as ₹1,200 per 10 grams. Retailers found themselves unable to pass these costs onto customers, leading to thinner profit margins and a shift toward lighter, lower-carat products to keep sales moving.
“We are already seeing a clear shift; average ticket sizes have dropped from ₹85k to ₹62k as customers move from 22K bangles to 18K or daily-wear pieces,” said Nitin Gupta of Delhi-based Swatik Jewels. “Our margins are getting squeezed because we can’t pass 100% of the higher procurement costs to price-sensitive buyers.”
Banks, which import most of India’s refined gold, had halted shipments since Indian customs began demanding the IGST on metal.
In 2017, when India adopted the IGST, gold-importing banks were exempted from paying the 3% levy. The tax demand was being imposed on banks following a delay in issuing a formal government order authorising bullion imports by banks, Reuters reported earlier this month. Now, the order is expected to be out in the coming days.
India, the world’s second-largest gold consumer, imported 35 tons of gold in April 2025 and averaged about 60 tons a month in the 2025-26 fiscal year to March.
India likely spent about $1.3 billion on gold imports in April, well below the monthly average of $6 billion in the last fiscal year, bank bullion dealers said, despite Indians celebrating Akshaya Tritiya, the second-biggest gold buying festival after Dhanteras, on April 19.
