GST Council may end IGST exemption on gold, silver imports by banks

The GST Council is likely to consider withdrawing the Integrated GST exemption available to banks and nominated agencies on imports of gold, silver and platinum when it meets on October 7, a move that would end a tax concession introduced nearly a decade ago.

Gold, silver and platinum imports ordinarily attract 3% IGST, but imports made by banks and government-notified nominated agencies are currently exempt. The proposed change would require these entities to pay the tax and bring their treatment in line with bullion exchanges.

2017 exemption under review

The exemption was introduced in 2017, when precious metal imports were more tightly canalised and nominated agencies played a central role in facilitating bullion trade.

The structure of the market has since evolved, including through the development of bullion exchanges. The proposal before the Council is aimed at removing the differential tax treatment and creating greater parity among entities importing precious metals.

The GST Council, comprising the Union finance minister and representatives of states and Union Territories, is expected to examine the proposal at its October 7 meeting.

Banks may pay 3% IGST

If the exemption is withdrawn, banks and nominated agencies would become liable to pay 3% IGST when importing gold, silver and platinum.

The proposal concerns the exemption at the import stage and does not, by itself, amount to a change in the existing GST rate on precious metals. The principal change would be the removal of preferential treatment currently available to specified importers.

The move could alter the tax treatment of bullion brought into the country through traditional nominated agencies while placing them on the same footing as imports routed through bullion exchanges.

Precious metal imports in focus

The proposal comes amid renewed government attention on India’s precious metal imports because of their impact on the country’s import bill and demand for foreign currency.

India is the world’s second-largest consumer of gold after China, with domestic demand driven substantially by the jewellery industry. Since a large proportion of the country’s requirement is met through imports, sharp increases in purchases can widen the trade deficit and increase demand for dollars.

The issue has assumed greater significance amid pressure on the rupee and an increase in India’s overall import bill.

Import duties raised

In May, the government raised the import duty on gold and silver to 15% from 6% as part of measures aimed at curbing non-essential imports.

The duty on platinum was similarly increased to 15.4% from 6.4%. The sharp increase reflected concerns over import demand at a time when external pressures were weighing on the economy.

Prime Minister Narendra Modi has also urged people to reduce gold purchases amid pressure on the rupee following an increase in import costs after the Iran-US-Israel war.

Gold imports continue rising

India’s gold imports remained elevated during the first five months of the current financial year. Imports during April-August 2026-27 rose 3.38% to $17.47 billion.

Silver imports moved in the opposite direction during the same period, declining 8.81% to $1.74 billion.

The differing trends underline gold’s continuing importance in India’s precious metal import basket despite government efforts to moderate demand.

Council to take call

The October 7 meeting will determine whether the exemption available to banks and nominated agencies since the introduction of GST should continue.

Withdrawal of the concession would represent another step towards uniform taxation of precious metal imports across different channels, while also forming part of the broader effort to address distortions in the bullion market and manage the impact of precious metal purchases on India’s external sector.