Abu Dhabi: The price of gold jewellery with the GST in India will be more than the amount customers pay in UAE to buy gold. This is likely to give UAE more business from India from July 1.
After the adoption of five percent VAT in January 2018, customers need to pay a huge 14 percent tax on gold purchases in India. Shamlal Ahamed M.P., managing director – international operations, Malabar Gold and Diamonds, said Indians residing in the UAE enjoy 13 to 14 percent difference in gold prices between here and in India, reports Khaleej times.
“GST has been set at three percent. In addition, there is five per cent GST on making charges. Earlier, it was one per cent excise and 1.2 per cent VAT. When you add 10 per cent customs duty, there will be a difference of around 13 to 14 percent between gold prices in India and the UAE,” he said.
Ahamed explained that on July 1, the rate in Kerala for 10 grams was Rs 22,536 whereas, in Dubai, it was only Rs 19,880. As per a report, the short-term effect may be disturbing for the country as it will take time for traders and the market to get acquainted with the new taxation system. The report further states that GST should eliminate double taxation and improve supply chain efficiency. GST can make the gold industry more transparent which, coupled with recent hallmarking legislation. India’s gold demand is expected to be between 650 to 750 tonnes in 2017, rising to 850 to 950 tonnes by 2020.
A consultant of business research and advisory, Aranca, Sonal Bhatia, said the impact of keeping gold GST at three percent would be a disadvantage to the Indian gold market. She said the next six months are going to be more turbulent for Indian jewellers as the industry will take some time to adapt to the three per cent GST while UAE gold is available at five percent VAT until the next reform due in 2018.
“Gold purchases are expected to be negatively impacted, especially during October 2017 [Dhanteras in India] as we can expect various Indians to buy gold from Dubai to save on taxes,” Bhatia said.
“The gold price has already gone up in India following the implementation of GST. NRIs and tourists will now take more gold from the UAE. We normally see a spurt during this time of the year. This is primarily on account of the holiday season,” Ahamed stated.