Import duty in gold trading

Import duty is a customs tax on gold entering a country. Major importers such as India have historically charged significant duty on gold bars and coins, adjusting the rate periodically for revenue and current-account reasons; other countries charge little or none. On top of duty, many countries apply sales tax or VAT to physical gold, though investment-grade bullion is exempt in some jurisdictions, such as the UK and EU for certain products.

How it applies to gold trading

Duty is the main reason local gold prices in importing countries sit above the converted international price. If the international price per 10 grams converts to a given amount in local currency, the local retail price adds the duty percentage, any sales tax and the dealer margin. When duty changes, local prices jump or fall overnight with no move in XAUUSD. High duty also encourages smuggling, which distorts official import statistics that analysts use to measure demand.

For a trader comparing a domestic gold rate with the international market, the current duty rate is the first number to check; it changes, so the rate should come from the current customs notification rather than memory.

To rebuild a domestic 10-gram price from the international one, convert the ounce price to grams, apply the exchange rate, then add the current duty and sales tax percentages in that order.

A common mistake

Reading a drop in a country’s local gold price as a fall in gold, when it was a duty cut. The two move independently.

See also: Gram and 10-gram pricing, Tola, Bullion, Paper gold vs physical.

Frequently asked questions