Hyderabad: As the Indian commerce ministry is seeking a cut in gold import duty to curb the smuggling, experts believe that it will lead to a drop in yellow metal rates in Hyderabad and other cities.
According to various media reports, the Finance Ministry is considering the recommendation to reduce the tariff from 12.5 percent to 10 percent. However, it is not clear whether the finance ministry will drop the tariff.
Gold smuggling vs trade deficit
While the reduction in tariff will help in curbing gold smuggling, it will result in a rise in the trade deficit which will worsen the rupee-dollar exchange rate which is already near its all-time high.
In July, the finance ministry raised the tariff from 7.5 percent to 12.5 percent to dampen the demand for gold in India which is the second largest consumer in the world.
As India fulfills most of its gold demand through import, it not only worsens the rupee-dollar exchange rate but also pushes up the trade deficit.
The finance ministry may try to balance between curbing gold smuggling and maintaining a trade deficit.
Demand to reduce GST
Apart from tariffs, GST on gold is also in focus as the bullion industry is seeking a reduction in the tax rate from 3 percent to 1.25 percent.
If this suggestion is accepted, it will also lead to a rise in demand for gold which will increase the import of the yellow metal thereby affecting the economy of the country.
Currently, the gold rates in Hyderabad and other cities are different as they are also dependent on the taxes levied by the state governments.
Hyderabad sees drop in gold rates today
On December 6, the gold rates dropped in Hyderabad. The rates of 22K and 24K gold dropped by Rs. 300 and Rs. 330 respectively.
Today, the gold rates of 22K and 24K in the city are Rs. 49300 and Rs. 53780 respectively.
In Delhi, the rates are Rs. 49450 and Rs. 53930 respectively whereas, the rates in Mumbai are Rs. 49300 and Rs. 53780.
