India Introduces Tougher Monitoring Rules for Gold Imports

The Indian government has introduced a stricter compliance framework for gold imports under the Advance Authorisation (AA) scheme, signaling a renewed effort to regulate bullion inflows and strengthen oversight of the gems and jewellery sector.

The Directorate General of Foreign Trade (DGFT), operating under the Department of Commerce, has issued a fresh notification tightening operational and monitoring conditions for importers dealing in gold. The revised norms came into effect immediately and are expected to significantly impact exporters and jewellery manufacturers relying on duty-free gold imports for export production.

The latest move follows the Centre’s recent decision to sharply increase customs duties on gold and silver, reflecting growing concerns over rising bullion imports, elevated international gold prices, and pressure on India’s current account deficit.

DGFT Introduces New Conditions Under Advance Authorisation Scheme

Gold Imports Capped at 100 Kilograms

Under the updated rules, the government has inserted new compliance notes under Standard Input Output Norms (SIONs) M1 to M8 applicable to the gems and jewellery industry.

One of the most significant changes is the imposition of a maximum import limit of 100 kilograms of gold under the Advance Authorisation scheme. The AA scheme traditionally allows exporters to import raw materials duty-free, provided the finished products are exported within a specified timeframe.

Officials believe the revised cap will help prevent excessive accumulation of imported gold and reduce the possibility of misuse of export-linked import benefits.

Mandatory Physical Inspection for First-Time Applicants

The Directorate General of Foreign Trade (DGFT)  has also tightened scrutiny for new applicants seeking import authorisation.

Under the revised compliance framework, first-time importers must now undergo mandatory physical inspection of their manufacturing facilities by regional authorities. The inspection aims to verify whether the applicant possesses genuine manufacturing infrastructure and operational capability before being allowed to import gold under the scheme.

This move is expected to discourage shell entities and reduce fraudulent claims under export promotion schemes.

Export Performance to Determine Future Import Approvals

50% Export Obligation Requirement Introduced

In another important policy change, importers will now be eligible for fresh import approvals only after fulfilling at least 50% of their export obligations under previous authorisations.

The government’s decision introduces a performance-linked approval mechanism designed to ensure that imported gold is genuinely used for export-oriented production rather than diverted into the domestic market.

Industry experts believe the new rule could increase accountability among exporters while improving transparency in gold trade operations.

Enhanced Reporting and Centralised Monitoring

The compliance requirements have also become more detailed and data-driven.

Importers are now required to submit fortnightly performance reports certified by an independent Chartered Accountant. Additionally, regional authorities must compile and forward monthly consolidated reports to DGFT headquarters for centralised monitoring and review.

The government’s emphasis on regular reporting reflects its broader strategy of tightening oversight across high-value import sectors.

Customs Duty on Gold and Silver Raised to 15%

Government Reverses Earlier Duty Cuts

The latest DGFT measures come shortly after the Centre increased the effective import duty on gold and silver from 6% to 15%, effective May 13.

The revised duty structure includes:

• 10% Basic Customs Duty
• 5% Agriculture Infrastructure and Development Cess (AIDC)

The government stated that the increase was necessary to protect domestic industry, control the current account deficit, and discourage speculative imports at a time when global bullion prices remain elevated.

The decision partially reverses the customs duty reduction announced in the Union Budget 2024-25, when the government had lowered import duties on gold to support the gems and jewellery sector, reduce local gold prices, and help curb illegal smuggling activities.

Why Gold Imports Matter to India’s Economy

India Remains One of the Largest Gold Consumers

India is among the world’s largest consumers and importers of gold, with demand driven by jewellery purchases, festivals, weddings, and investment needs.

However, heavy gold imports significantly impact India’s trade balance because the country imports most of its bullion requirements. A sharp increase in gold imports can widen the current account deficit and place pressure on the rupee.

The government has historically used import duties, quotas, and compliance rules as policy tools to manage gold demand and stabilize external finances.

Gems and Jewellery Sector Faces Fresh Challenges

While the gems and jewellery industry contributes substantially to exports and employment, the stricter compliance norms could increase operational costs and procedural burdens for exporters.

Smaller exporters may face challenges in meeting enhanced documentation, inspection, and reporting requirements. However, policymakers argue that tighter regulation is necessary to ensure that export incentive schemes are used appropriately and transparently.

Conclusion

India’s latest crackdown on gold imports highlights the government’s growing focus on strengthening trade compliance, managing external economic risks, and improving oversight in the bullion sector. By capping imports under the Advance Authorisation scheme, linking approvals to export performance, and enforcing stricter monitoring mechanisms, the DGFT aims to curb misuse while promoting genuine export activity.

Combined with the recent increase in import duties on gold and silver, the new measures indicate a broader policy shift toward tighter control of non-essential imports amid global economic uncertainty and rising commodity prices. While the regulations may create short-term challenges for the gems and jewellery industry, they are expected to improve transparency and support long-term economic stability.