The government has withdrawn a key tax benefit for banks importing gold, silver and platinum, raising costs for the main channels that supply India's bullion market.

The exemption from paying 3 per cent Integrated GST on precious metals imported by banks and nominated agencies was not extended beyond March 31. Since April 1, these imports have attracted the full 3 per cent levy. The government informed the GST Council of the change on October 8.

Revenue Secretary Arvind Shrivastava said the move ensures "parity of taxes imposed on imports of gold and other metals through different routes". The exemption dated back to 2017, when tightly controlled trade needed facilitation.

Gold imports have been a concern for the government because they drain foreign exchange. India is the world's second-biggest gold consumer after China, with demand driven by the jewellery industry.

In May, the government had already hiked import duties on gold and silver to 15 per cent from 6 per cent. Gold imports in April-August grew 3.38 per cent to $17.47 billion, while silver imports fell 8.81 per cent to $1.74 billion.