India Tightens Silver Imports to Close UAE Trade Deal Loophole

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India has tightened silver imports in a major policy move to stop traders from taking advantage of a fresh duty gap created after the government raised import taxes on precious metals. Once duties on gold and silver were increased to 15%, concerns grew that lower-duty silver could start entering India through Dubai under the India-UAE free trade agreement, giving importers a way to avoid the full burden of the higher tariff. To shut that route, the Centre has shifted silver imports from the “free” category to “restricted”, which means traders will now need government approval before bringing silver into the country. The decision, announced just days after the duty hike, is part of a wider effort to control precious metal inflows, 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 silver’s import status from “free” to “restricted” with immediate effect. This means importers now need a government licence to import silver into India. The new rule also covers silver alloys mixed with gold and platinum.

What was the import duty hike?

Earlier on May 12, the government raised import duty on gold and silver from 6% to 15%. Along with this, bullion imports also faced a 3% Integrated Goods and Services Tax (IGST).

Loophole in the FTA

Under the India-UAE Comprehensive Economic Partnership Agreement (CEPA), which started on May 1, 2022, India is gradually cutting tariffs on silver imports from the UAE from 10% to zero over ten years, ending in 2031. Right now, 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 the normal duty and the UAE concessional rate to eight percentage points, creating a strong incentive for traders to reroute global silver shipments through Dubai," think tank Global Trade Research Initiative (GTRI) flagged.

Centre steps in with policy measures

Officials fear this bigger duty difference could lead to a large rise in low-duty silver imports through the UAE. The new licence system is meant to help the government control how much silver enters India and when. In a report, GTRI stated, “Officials fear the widening tariff gap could trigger 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 still 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 firms importing silver under export-promotion schemes like Advance Authorisation for products such as jewellery. This means exporters can still access silver for manufacturing. “The restrictions will not apply to imports by 100% Export Oriented Units, Special Economic Zones, or firms importing silver under export-promotion schemes such as Advance Authorisation for use in export products like jewellery,” the think tank said.

What about gold inflows?

Gold has not been moved to the restricted category because the duty advantage through the UAE is much smaller, around 1% under a tariff-rate quota system, so the chance of large-scale arbitrage is lower. India’s silver imports crossed $12 billion in fiscal year 2026, marking a huge 150% jump from the previous year. At the same time, gold imports rose more than 24% to a record $71.98 billion in 2025-26, even though shipment volumes fell 4.76% to 721.03 tonnes. This sharp rise added to government concerns and these measures are aimed at cutting non-essential imports and reducing pressure on foreign exchange reserves at a time when high crude oil prices and global geopolitical tensions are affecting the economy.

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