Reduction in customs duty diminishes appeal of buying gold overseas: Indian retailers 

 The reduction in customs duty to 6% has lessened the advantage of Dubai’s VAT-free gold purchases, which typically involve a 5% VAT 

Kolkata – The recent reduction in customs duty on gold in India is set to significantly impact the trend of buying gold abroad, particularly from Dubai, according to Indian jewellers with operations in the UAE. 

Dubai has long been a popular destination for Indian shoppers seeking gold due to a steep rise in India’s customs duty on the precious metal in July 2022. However, the fiscal 2024-25 budget has more than halved the import duty on gold, narrowing the price gap between Indian and overseas gold. 

Jewellers are predicting a shift in purchasing patterns, with domestic sales expected to see a substantial boost. Joy Alukkas, chairman of the Joy Alukkas Group, which has a significant presence in Dubai, noted, “We anticipate that nearly 50% of our UAE business will move to India, as Indian tourists who previously travelled to Dubai for gold will now shop locally. While Indian expats in Dubai may continue to purchase there, the trend will largely shift.” 

The reduction in customs duty to 6% has diminished the advantage of Dubai’s VAT-free gold purchases, which typically involve a 5% VAT. Rajiv Popley, director of Popley & Sons, a jeweller with stores in both India and the UAE, explained, “The cost of overseas gold being cheaper than in India is more of a mindset. The lower labour costs in India and the introduction of mandatory hallmarking and HUID numbers have addressed concerns about gold purity.” 

Non-Resident Indians (NRIs) in Dubai do not benefit from VAT refunds, and Indians purchasing gold abroad typically recover only about 60% of the VAT paid. Additionally, Popley noted that issues such as the inability to exchange or alter gold pieces purchased abroad can lead to unnecessary expenditures. 

Bhargav Baidya, a gold trade analyst, added, “The 1% duty differential between India and Dubai will be offset by discounts offered by Indian jewellers. As volume increases, jewellers can absorb this small hit in profitability.” 

Saurabh Gadgil, chairman of PNG Jewellers, highlighted that with the new duty structure, Indian gold prices are now competitive with those in other global markets. “We are now in a position to offer jewellery at prices comparable to any other country,” he said. 

The reduction in customs duty is expected to not only increase domestic gold sales but also stimulate production and innovation in India’s gold jewellery sector, benefiting both artisans and consumers. 

Retail Jeweller India News