But the move has created an opportunity for smugglers who are able to offer prices legitimate importers cannot match, they said. The grey market discount has gone beyond $200 per ounce, or more than 4%, said a Mumbai-based bullion division head at a private gold importing bank, adding that banks were unable to offer even a $10 discount, let alone one of three digits. He declined to be named because he was not authorised to speak to media.
The recent resurgence in the grey market suggests illegal imports could exceed 100 tons in 2026, said another dealer who also declined to be identified because he was not authorised to speak to the media.
Four other dealers interviewed by Reuters shared the view that illegal gold imports could exceed 100 tons in 2026.
At current prices, 100 tons of gold would be worth about $14.35 billion, implying roughly $2.65 billion in lost tariffs and sales tax.
Smugglers can offer steep discounts because they do not pay taxes on gold, including import tariffs and goods and services tax that total 18.45%, the bullion dealers said. “There’s a margin of more than 2.5 million rupees ($26,121.25) on bringing in a one-kilo bar, which is roughly the size of an iPhone. It is natural that people will try to make quick bucks,” the second dealer said. “Even if grey-market operators sell at a 4% discount, they are still making a killing,” said a Kolkata-based bullion dealer.
SMUGGLING TARNISHES LEGAL MARKET
Gold smuggling fell from 156.1 tons in 2023 to 69.2 metric tons the following year, and declined further in 2025 to 20.4 tons after India cut import duties on gold.Before the duty cut, an average of 108 metric tons of the precious metal was smuggled into the country each year over the previous decade, according to data compiled by the World Gold Council.
India imported 45.6 tons of gold in April, but imports may have halved in May as banks and refiners scaled back overseas purchases amid deep discounts, said a Hyderabad-based bullion dealer. Hefty discounts in the grey market have disrupted legal trade, pushing domestic discounts on legal gold to more than $100 an ounce as stocks imported before the duty hike are sold at steep discounts, making refining uneconomical, said James Jose, managing director of refiner CGR Metalloys. New Delhi levies a 0.65% lower import duty on gold dore, a semi-pure alloy, than on refined gold, but the alloy has also been affected by the tariff change.
“Gold refiners typically operate on margins of around 0.65%. With discounts now well above that level, refiners have little incentive to import dore,” Jose said.