Indian jewellers foresee a surge in domestic gold purchases due to a significant customs duty cut in the 2024-25 budget. This change has narrowed the price gap between India and Dubai, making Indian gold more appealing. The reduction is expected to boost domestic gold production, and jewellers plan to introduce new designs to attract customers.
The emirate had been a magnet for gold crazy Indians following a steep rise in customs duty in India in July 2022. Duty on imports of the yellow metal was more than halved in the fiscal 2024-25 budget.
The narrowed duty differential and consequently, lower prices in India after the budget means buying gold overseas is likely to lose its lustre significantly.
Nearly 50% of our UAE business will shift to India as Indian tourists who would go to Dubai to buy jewellery will now shop in India," said Joy Alukkas, chairman of Joy Alukkas Group, which has a big presence in Dubai. "Indian expats living in Dubai and others may continue to buy from the UAE.
The reduction in customs duty to 6% means the value-added tax (VAT) of 5% applicable to gold purchases in Dubai isn't sufficient to beat the labour cost differential. "Overseas gold is cheaper than in India is just a mindset," said Rajiv Popley, director at Bandra-based Popley & Sons, which has a presence in UAE. "The labour cost is significantly lower in India. Moreover, with the introduction of mandatory hallmarking and HUID number, any question over the purity of gold in India has been addressed," he said Once you buy a piece of gold from Dubai, you do not have the option to exchange it and get some other pieces if you do not like it. Moreover, the 1% duty differential between gold jewellery in India and in Dubai will be made up because Indian jewellers will offer some discount to keep their customer base intact and acquire more customers. If volume increases, jewellers will be able to take that small hit in profitability," said Bhargav Baidya, a gold trade analyst.
PNG Jewellers chairman Saurabh Gadgil said Indian import duty is now at par with the US too. "Now, we will offer them jewellery at a price that is competitive with any other countries in the world."
source: ECONOMIC TIMES
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