Buying gold from the GCC countries, Singapore and Malaysia will now be cheaper when compared to buying gold from India, according to Malabar Group Executive Director Abdul Salam KP. Here’s why:
•The additional import duty for gold announced in India’s Union Budget 2019 will hurt the domestic gold and jewelry market and promote illegal gold trade, which is detrimental to the economy.
•While the new duty structure affects the Indian jewelry industry negatively, jewelry business in the neighboring markets will benefit because of this duty hike.
•Even the most popular designs of India will be much cheaper in the UAE, other GCC states, Singapore and Malaysia.
•Earlier these markets depended on imports from India, whereas now most of these markets have developed their own manufacturing facilities. As such, jewelry manufacturing is a growing industry in these markets.
•With the revised duty structure, customers, especially from India, can benefit from a price difference of more than Rs.400 ($6) per gram on gold purchases from the GCC countries. This will definitely encourage bulk buyers, especially for wedding-related purchases, to visit Dubai or any of the other markets.
•The current price difference is mostly on account of 12.5 percent custom duty, in addition to 3 to 4 percent of other taxes. Whereas in the GCC countries, gold bullion is zero-rated, and the GST charged in many countries is refunded to tourists, thus amounting to practically no duty or tax on the purchases made by them.
•The increase in import duty from 10 to 12.5 percent will also affect the import of jewelry from different parts of the world into India. This will affect availability of internationally designed and manufactured jewelry. Customers will therefore find a much larger array of designs and jewelry in the GCC, Singapore and Malaysia markets.
•People from the subcontinent view gold as an ideal investment. As it has a 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.