Over a dozen banks, comprising local and multinational lenders, are permitted to import gold that’s sourced from international bullion banks such as JP Morgan Chase, UBS and StanChart.
Every year, a finance ministry notification in April exempts importing banks from integrated goods and services tax, which is levied on inter-state supplies of goods and services, as well as imports-exports.
The framework has been in place for nearly a decade.
ET BureauWith the ministry yet to come out with the communique for FY27, banks stopped importing gold in April.
About 40% of the 700-odd tonnes of annual gold imports is handled by banks authorised by the Reserve Bank of India, and the Directorate General of Foreign Trade (DGFT), an arm of the commerce and industry ministry.
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Freed of IGST, banks collect state and central GST (SGST and CGST) from jewellers and traders (to whom the imported gold is sold) to pay tax — unlike regular importers, who set off CGST and SGST amounts against IGST.
Banks prefer this mechanism to continue.
Trade Disruptions
“We’re not sure what’s delaying the notification,” a senior banker told ET. “Maybe, (there is) no specific reason, but speculations are that the government wants gold imports to slow down, with the current account and balance of payment deficits pulling down the rupee. Some feel banks may be nudged to import through the Gift City bullion exchange.”
The trade, however, is feeling the pinch. On April 27, a jeweller lobby told the commerce ministry that the trade is “facing serious disruptions due to non-availability of gold through nominated banks, resulting in export orders getting held up.”
On April 6, RBI authorised 17 banks to import gold and silver for three years till March 2029. Ten days later, a DGFT notice spelt out the eligibility criteria for them. Since a similar policy is followed for silver, banks also refrained from importing silver in April.
In enabling imports, the department of revenue under the finance ministry must amend the FY26 notification to update the list of nominated banks for FY27. Till then, banks must pay IGST on imports.
Since banks are prohibited from bullion trading, they store the gold shipped by international banks, who have limits on the local banks. Money is not paid upfront. As and when clients demand, the nominated banks quote the price after consulting the overseas bank to supply gold under a back-to-back arrangement.
Alternatively, they follow the gold metal loan system, where bullion is borrowed from an offshore lender to on-lend to clients here. The industry has requested the commerce ministry to pursue the matter with the department of revenue, said an official aware of the matter.
“Moving to a new system or picking another location for import could take time. Also, it may impact liquidity and the ease with which multiple delivery points are used today,” said another banker.
Gold imports surged 24% to a new high of $71.98 billion in FY26, against $58 billion in FY25, $45.5 billion in FY24 and $35 billion in FY23. However, in volume terms, imports dipped 4.7% to 721.03 tonnes in FY26, from 757.09 tonnes in the previous fiscal year.