Gold import duty cut: Why Indians may not find buying gold from Dubai as attractive post Budget 2024

Gold import duty cut in Budget 2024: The recent reduction in customs duty on gold imports in the Union Budget 2024 is expected to significantly impact the gold shopping habits of Indian consumers who frequently visit Dubai. Indian jewellers with stores in both India and the UAE believe that the narrowed duty differential will result in lower gold prices in India, making it less attractive for Indians to purchase gold in Dubai.
The emirate had attracted gold-enthusiast Indians following a steep rise in customs duty in India in July 2022. In the fiscal 2024-25 budget, the duty on gold imports was more than halved.
The duty cut is also expected to boost gold jewellery production in India, particularly the popular ‘Kolkatti’ jewellery from Kolkata, which is favored by Indian expats in Dubai and tourists from various countries. This move will encourage gold artisans to create new designs in both heavyweight and lightweight jewellery, attracting consumers to purchase gold from India.
According to an ET report, Joy Alukkas, chairman of Joy Alukkas Group, estimates that nearly 50% of their UAE business will shift to India as Indian tourists who previously bought jewellery in Dubai will now prefer to shop in India. However, Indian expats living in Dubai and other customers may continue to buy from the UAE.
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Rajiv Popley, director at Popley & Sons, believes that the perception of overseas gold being cheaper than in India is merely a mindset. He points out that the labour cost is significantly lower in India, and with the introduction of mandatory hallmarking and HUID numbers, the purity of gold in India is no longer a concern.
Furthermore, NRIs in Dubai do not receive VAT refunds, and Indians travelling abroad only receive about 60% of the VAT back on their gold purchases. Gold trade analyst Bhargav Baidya suggests that the 1% duty differential between gold jewellery in India and Dubai will be offset by Indian jewellers offering discounts to retain and attract customers.
Saurabh Gadgil, chairman of PNG Jewellers, notes that Indian import duty is now on par with the US, allowing Indian jewellers to offer competitive prices compared to other countries worldwide. The reduced customs duty is expected to make gold purchases in India more attractive and convenient for Indian consumers, potentially leading to a significant shift in their gold shopping preferences.