Gold custom duties hiked: Gold duty hike may raise domestic prices, divert supplies to grey markets: SBI report

Gold is expected to become costlier after the government's recent move to raise import duty to 15%.

Alongside, the impact is likely to show up in domestic prices as well as trade patterns, a report by SBI Research has predicted.SBI Research said that changes in gold import duty have been made several times in the past, and each instance has had an impact on market behaviour.

One of the main effects is a widening gap between international and domestic gold prices, which can create arbitrage opportunities and may also push some supply towards grey channels.“The decision to increase duty on gold imports has been taken on numerous occasions in the past.

However, imposition of duty has its consequences in diverting the physical supply to grey channels,” the report said.The duty was earlier reduced to 6% in June 2024 and has now been increased again to 15%.The report said that higher import duties tend to raise the landed cost of gold, which can influence domestic prices.

It also noted that past periods of higher duty have been linked with an increase in seizures by the Directorate of Revenue Intelligence (DRI), based on monthly data.Import trends: value rises, volumes fallSBI Research pointed to a clear divergence in import trends.