The government’s recent hike in gold import duty has fuelled a surge in smuggling, with illicitly imported gold reportedly being sold at discounts of up to Rs 10 lakh per kilogram, creating a significant price gap with legally imported bullion.According to industry participants cited by ET, gold brought into the country through unofficial routes is currently available at a discount of Rs 8-10 lakh per kilogram when compared current domestic market prices. Much of this gold is said to come from the Middle East and is carried into the country by passengers arriving from Gulf nations without being declared at airports.India Bullion & Jewellers Association national secretary Surendra Mehta told the financial daily that a significant portion of such gold is brought in by travellers who wear the jewellery and pass through airport green channels.“Market observers warned that the situation could mirror developments seen after an earlier duty hike in 2013. According to the World Gold Council, unofficial gold imports rose sharply after that increase, climbing seven-fold within a year.A bullion dealer from Mumbai’s Zaveri Bazar said the current duty structure has created strong incentives for grey market operators. He explained that the landed cost of one kilogram of gold is around Rs 1.65 crore after accounting for the 15% import duty and 3% goods and services tax. Of this, the value of the gold itself is about Rs 1.40 crore, while taxes account for the remaining Rs 25 lakh.“The landed price of a kg of gold is Rs 1.65 crore, with 15% import duty and 3% goods and services tax. The price of gold alone is Rs 1.40 crore and the remaining Rs 25 lakh is duty and GST,” he said. “When it is brought through the grey route and sold to jewellers or bullion dealers, the seller immediately makes a gain of Rs 25 lakh per kg. What the seller does is offer the gold at a discount of Rs 8-9 lakh per kg and get Rs 16 lakh as profit.”Besides Gulf countries, traders identified Bangladesh and Nepal as other sources of smuggled gold entering India. They said such activity is largely concentrated in Maharashtra, Tamil Nadu, Gujarat and West Bengal.The issue was highlighted again last week when customs officials at Mumbai’s Chhatrapati Shivaji Maharaj International Airport seized smuggled gold valued at more than Rs 4.19 crore from two passengers who had arrived from Dubai.Industry experts said it is still too early to estimate the scale of smuggling this financial year, given that the duty increase from 6% to 15% was implemented only weeks ago.Data cited by the World Gold Council shows a recurring link between duty changes and unofficial gold inflows. The organisation said higher import duties between 2013 and 2026 were followed by increased levels of unofficial or smuggled gold, while reductions in duty were accompanied by significant declines in such inflows.Following a 4% duty hike in 2013, unofficial imports rose from about 10 tonnes in the first quarter of that year to 70 tonnes by the first quarter of 2014.The World Gold Council also noted that even when duties remained unchanged at 10% from the second half of 2013 to the second quarter of 2019, unofficial inflows stayed elevated, averaging 34 tonnes per quarter.