Gold import duty reduction likely to shift Indian consumer preferences

• Budget 2024 reduces duty on gold import duty

• The reduced customs duty is anticipated to make gold purchases in India more appealing and convenient for Indian consumers, potentially leading to a significant shift in their gold shopping preferences

PRAVASISAMWAD.COM

The recent reduction in customs duty on gold imports, as announced in the Union Budget 2024, is poised to significantly alter the gold shopping patterns of Indian consumers who frequently visit Dubai. Indian jewellers with stores in both India and the UAE anticipate that the narrowed duty differential will lead to lower gold prices in India, diminishing the appeal of purchasing gold in Dubai.

Previously, a sharp increase in customs duty in India in July 2022 had driven gold enthusiasts to Dubai. However, with the fiscal 2024-25 budget more than halving the duty on gold imports, this trend is expected to reverse. The duty cut is also likely to boost gold jewellery production in India, especially the sought-after ‘Kolkatti’ jewellery from Kolkata, which is popular among Indian expats in Dubai and tourists from various countries. This development will encourage gold artisans to innovate with new designs in both heavyweight and lightweight jewellery, attracting consumers to buy gold from India.

Saurabh Gadgil, chairman of PNG Jewellers, notes that Indian import duty is now on par with the US, enabling Indian jewellers to offer competitive prices compared to other countries

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 shopping in India. Despite this, Indian expats living in Dubai and other customers may still continue purchasing from the UAE.

Rajiv Popley, director at Popley & Sons, suggests that the perception of overseas gold being cheaper than in India is just a mindset. He highlights that labour costs are significantly lower in India and that 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 traveling abroad only get about 60% of the VAT back on their gold purchases.

Gold trade analyst Bhargav Baidya believes that the 1% duty differential between gold jewellery in India and Dubai will be balanced 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, enabling Indian jewellers to offer competitive prices compared to other countries. The reduced customs duty is anticipated to make gold purchases in India more appealing and convenient for Indian consumers, potentially leading to a significant shift in their gold shopping preferences.

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