To close this route, the Center has shifted silver imports from the ‘free’ category to the ‘restricted’ category, meaning that traders will now need government approval before bringing silver into the country.
The decision, announced just days after the tariff hike, is part of a broader effort to control precious metal flows, protect foreign exchange reserves, and close trade loopholes.
New rules for silver imports
On May 16, the Directorate General of Foreign Trade (DGFT), through Notification No. 17/2026-27, changed the import status of silver from “free” to “restricted” with immediate effect. This means that importers now need a government license to import silver into India.
The new rule also covers silver alloys mixed with gold and platinum.
What is the increase in import duties?
Earlier on May 12, the government raised import duties on gold and silver from 6% to 15%. Besides, bullion imports also faced an Integrated Goods and Services Tax (IGST) of 3%.
Loophole in the Free Trade Agreement
Under the India-UAE Comprehensive Economic Partnership Agreement (CEPA), which began on May 1, 2022, India is gradually reducing customs duties on silver imports from the UAE from 10% to zero over a period of ten years, ending in 2031.
Currently, the concessional tariff on silver from the UAE is 7%.Before May 12, India’s normal import duty on silver was 6%, so there was little reason to route silver through Dubai. “But the government’s decision on May 12 to raise the standard tariff to 15% widened the gap between normal duties and concessional rates in the UAE to eight percentage points, creating a strong incentive for traders to reroute global silver shipments via Dubai,” Global Trade Research Institute (GTRI) noted.
The Center intervenes in policy measures
Officials fear that this larger tariff differential will lead to a significant increase in low-duty silver imports through the UAE. The new licensing system is intended to help the government control how much silver enters India and when. In its report, GTRI stated, “Officials fear that the widening tariff gap will lead to large-scale arbitrage-driven imports from the UAE.The new licensing requirement is expected to give the government tighter control over the quantity and timing of silver imports while allowing duty-free imports for export-oriented industries.
What about export industries?
The restrictions will not apply to 100% export-oriented units (EOUs), special economic zones (SEZs), or companies importing silver under export promotion schemes such as prior authorization for products such as jewellery. This means that exporters can still access silver for manufacturing purposes.“The restrictions will not apply to 100% imports from export-oriented units, special economic zones, or companies importing silver under export promotion schemes such as prior authorization for use in export products such as jewellery,” the think tank said.
What about gold flows?
Gold has not been moved to the restricted category because the tariff advantage across the UAE is much smaller, around 1% under the tariff quota regime, and so the opportunity for widespread arbitrage is lower.India’s silver imports crossed $12 billion in fiscal 2026, representing a massive 150% jump from the previous year. Meanwhile, gold imports rose more than 24% to a record $71.98 billion in 2025-26, although shipment volumes fell 4.76% to 721.03 tons.This sharp rise has increased the government’s concerns, and these measures aim to reduce unnecessary imports and relieve pressure on foreign exchange reserves at a time when high crude oil prices and global geopolitical tensions are affecting the economy.