KUWAIT: The union budget 2019 will definitely help in the progress of the rural India however the additional import duty for gold will hurt the domestic gold and jewellery market and promote illegal gold businesses which is detrimental to the economy. While the new duty structure effects the Indian Jewellery Industry negatively, Jewellery business in the neighboring market will benefit out of this duty hike. Even the most popular designs and articrafts of India will be much cheaper in the UAE, other GCC states, Singapore and Malaysia.
Earlier these markets were depended on imports from India, whereas most of these markets have developed with manufacturing facilities. As the machineries and manpower are available from various parts of the world, Jewellery manufacturing is growing in these markets.
Customers from the subcontinent, especially from India taking advantage of this price benefit.
With the revised duty structure, customer will benefit more than Rs. 400 per gram on the gold purchases from GCC countries. This will definitely encourage bulk buyers, especially on wedding related purchases, to visit Dubai or any of these markets. If a family of four visit and bring back ornaments on a reasonable allowed quantity, they can cover their trip cost easily. They have additional benefit of much wider choice from international designs of Jewellery.
Current price difference is mostly on account of 12.5 percent custom duty and 3 to 4 percent other taxes. Whereas in GCC countries, gold bullion is zero rated, and the GST charged in many countries are refunded to the tourists, thus practically no duty or tax on the purchases made by them.
The increase in import duty from 10 percent to 12.5 percent will also affect the import of jewellery from different parts of the world into India. This will affect availability of internationally designed and manufactured jewellery. Customers will therefore find a much larger array of designs and jewellery in markets like GCC, Singapore and Malaysia etc.
The price advantage of 10 – 12.5 percent along with the VAT refund for the tourists which will leads the NRIs and tourists to buy gold from this part of the world.
People from subcontinent still believe gold as the ideal investment compared to other options. As a substance with high market liquidity, it can be easily sold without having to alter the price. In addition, it is a movable asset whose value does not witness depreciation with uncertain economies. So this price advantage will be beneficial for those who buy gold as an investment. — Abdul Salam KP is the Group Executive Director, Malabar Group
By Abdul Salam KP