This post was originally published on 10 January 2017.
Dubai has imposed a 5% import duty on gold, a move that is likely to hit India’s exports to the country, a report by The Economic Times, said.
Apart from impacting the Indian gold market, which exports 45% to 50% of Dubai’s total gold jewellery, NRIs will feel the heat as this will no longer be a cheap destination for gold jewellery.
According to a report by Navbharat Times, the import duty is also extended to the import of diamond jewellery.
The new levy may , however, boost bridal jewellery sales in India because many Indian shoppers had turned to Dubai owing to the cheaper gold there and the price difference may no longer be attractive enough.
Ashok Minawala, director, All India Gems & Jewellery Trade Federation, was quoted in the ET article as saying, “Over the years, Rs 4,000 – Rs 5000 crore of bridal jewellery purchase which shifts to Dubai can come back to India.”
The comparatively cheaper rates, reliable quality, and the fact that Indians do not need to pay customs duty if they wear a reasonable amount of gold jewellery on their body when they return to India are the reasons that drew many to buy gold from Dubai.
However, this new tax will practically wipe out the difference in gold rates in India and Dubai, making many Indians turn to the Indian market to buy gold jewellery.
The gold that is exported from India to Dubai is further re-exported to other parts of the world. But, this new tax is not applicable on re-export through Dubai. In short, the gold jewellery intended to be used in Dubai is only liable for this tax.