Summary:
Cash gold sales are gaining traction in India as elevated gold prices and higher import duties increase the cost of formal purchases. Discounts in informal transactions are attracting some buyers, while falling official imports highlight changing demand patterns ahead of the festive season.
High gold prices and rising tax costs are changing buying patterns in India, with more consumers turning towards cash-based, under-the-counter gold transactions to reduce their purchase costs. In these transactions, bullion and jewellery are exchanged without official invoices, allowing buyers to negotiate lower prices compared with the formal market.
According to people familiar with the trade, bulk buyers can save as much as 6% compared with prevailing market prices through cash deals. Dealers accepting cash payments are able to avoid certain costs and pass a part of the savings to customers.
The trend has gained momentum after gold prices surged to record levels earlier this year. Although prices have moderated from their peak, they remain nearly 28% higher than a year ago, keeping affordability concerns alive among consumers.
Gold Import Duty and GST: How Much Tax Do Buyers Pay?
India's gold market has faced a higher import-duty burden since May 2026.
The government increased the effective import duty on gold and silver from 6% to 15%, while retail gold purchases are also subject to 3% GST.
Key Gold Numbers
| Factor | Current rate / development |
| Gold import duty | 15% |
| GST on gold purchases | 3% |
| Previous import duty | 6% |
| Duty increase | 9 percentage points |
Why are buyers moving towards cash gold purchases?
The key reason behind the rise of informal gold sales is the widening gap between official market prices and negotiated cash rates. With gold becoming increasingly expensive, even small percentage discounts translate into meaningful savings for buyers.
One customer, identified only as Anuradha, purchased wedding jewellery for her daughter and received a discount of ₹5,000 for every 10 grams by opting for a transaction without a receipt. The savings proved attractive despite the lack of formal documentation.
Some customers are reportedly able to negotiate discounts of up to ₹10,000 per 10 grams depending on their relationship with jewellers and bargaining ability.
Why Did India Increase Gold Import Duty?
Gold is one of India's major imported commodities and has a significant impact on the country's import bill and external balance.
The government has sought to reduce excessive gold imports because high imports can increase pressure on:
- India's trade deficit
- Foreign-exchange requirements
- Current-account balance
- The rupee
However, higher import duties can also increase the price difference between formal and unofficial markets, potentially creating incentives for some market participants to seek alternative supply channels.
Higher import duty and GST add to consumer burden
The informal market has expanded after the government increased import levies on gold and silver to 15%, more than doubling the earlier rate of 6%. Retail buyers also pay an additional 3% GST on gold purchases, increasing the overall cost of ownership.
The policy was introduced to reduce gold imports and manage the impact of the precious metal on India’s trade deficit. However, the higher tax burden has also increased the incentive for some buyers and traders to explore unofficial channels.
India is the world’s second-largest gold consumer after China, with demand driven by weddings, festivals and gold’s role as a store of family savings. Since domestic production is limited, most of the country’s gold demand is met through imports, which puts pressure on the trade balance and currency.
India's Gold Imports: What Has Changed?
Gold remains one of India’s largest imported commodities after crude oil. The country’s trade deficit widened to nearly $32 billion in July, while gold import bills increased more than 32% year-on-year during the four months through July.
The rise in imports earlier prompted calls for consumers to reduce gold purchases to conserve foreign exchange. However, August gold imports declined to less than half of the previous year’s level, showing some moderation in demand.
Cash Gold Sales vs Formal Gold Purchases
| Formal Gold Purchase | Informal / Off-the-Books Transaction |
| Invoice provided | Invoice may not be provided |
| Transaction is documented | Limited transaction documentation |
| Taxes are accounted for | Tax-compliance concerns may arise |
| Greater consumer documentation | Lower documentation and consumer protection |
| Easier purchase verification | Greater counterparty and authenticity risk |
Shadow trade gains ahead of wedding and festive season
The unofficial gold market has existed in India for decades, but the incentive to bypass official channels was limited when import duty was lower. With the current tax structure and elevated prices, cash transactions have become more attractive for some buyers.
The timing is significant as India enters the peak wedding and festive buying period, which generally begins around mid-October and continues until early March. Demand during this period traditionally remains strong as consumers purchase jewellery for weddings and celebrations.
While cash discounts provide immediate savings to buyers, transactions without proper invoices can affect transparency, consumer protection and tax compliance in the gold ecosystem. The shift highlights how high commodity prices and taxation can influence purchasing behaviour in one of the world’s largest gold markets.
