India’s listed jewellery companies witnessed selling pressure in Wednesday’s trade after the Finance Ministry announced a steep increase in import duties on gold, silver and other precious metals through a late-night notification. The revised structure, effective May 13, raises the overall import tax burden on gold and silver imports to 15%, significantly altering the economics of the domestic bullion and jewellery trade.

Under the revised framework, the government has imposed a 10% basic customs duty along with a 5% Agriculture Infrastructure and Development Cess (AIDC) on imports of gold and silver. The earlier effective tax incidence stood at around 6%. The revised notification also extends to platinum, jewellery findings and industrial imports linked to precious metals.

The immediate market reaction was visible across listed jewellery counters. Kalyan Jewellers led the decline, falling more than 4% during intraday trade, while Titan Company, Senco Gold and PC Jeweller also traded in negative territory. P N Gadgil Jewellers, however, remained largely unchanged despite broader sector weakness.

The selloff reflects investor concerns that higher import duties could increase raw material costs for jewellers at a time when gold prices are already trading near historic highs. India remains one of the world’s largest consumers of gold, and any sharp increase in import costs typically flows directly into retail prices, affecting demand elasticity across both discretionary jewellery purchases and investment-driven buying.

The policy announcement also triggered an extraordinary move in domestic bullion markets. Gold prices on the Multi Commodity Exchange of India (MCX) hit the 6% upper circuit at ₹1.62 lakh per 10 grams, while silver prices surged to the upper circuit limit of ₹2.95 lakh per kilogram. International bullion markets also remained firm, with spot silver rising to $87.40 per ounce and gold futures extending gains in overseas trade.

The sharp jump in domestic prices highlights the direct transmission effect of import duties in India’s bullion ecosystem. Since the country relies heavily on imported precious metals to meet domestic demand, any increase in customs duty immediately raises landed costs for refiners, wholesalers and retailers.

From a business perspective, organised jewellery retailers may face a mixed operating environment in the near term. On one hand, higher gold prices can inflate inventory values and support revenue growth in nominal terms. On the other, elevated prices may reduce consumer footfalls, delay wedding-related purchases and compress volume growth, especially in price-sensitive markets.

The impact may be more pronounced for companies operating with aggressive store expansion strategies or higher working capital exposure. Firms with strong balance sheets and established hedging mechanisms could be relatively better positioned to navigate price volatility compared with smaller regional players.

The government’s decision appears aligned with a broader macroeconomic objective of curbing non-essential imports and protecting foreign exchange reserves during a period of heightened global uncertainty. India’s import bill remains sensitive to fluctuations in crude oil and precious metal prices, both of which materially influence the current account deficit.

Historically, sharp increases in gold import duties have also raised concerns around unofficial supply channels and grey market activity. While organised retailers tend to benefit from regulatory formalisation over the long term, abrupt price increases can temporarily disrupt purchasing behaviour across the value chain.

For the broader market, the development creates divergent implications across sectors. Jewellery retailers may face near-term earnings pressure if demand slows materially, while gold financing businesses and recycling-linked segments could witness higher activity. Banks and NBFCs with significant gold loan exposure may also see collateral values rise alongside bullion prices.