UAE jewellers hope for Diwali sparkle after India duty hike
DIAMOND JEWELLERY LEVY HIKED TO 20%, BUT THAT ON GOLD REMAINS UNCHANGED
UAE jewellers are hoping for some sparkle to show up in their numbers after India hiked import duties on diamond jewellery from 15 per cent to 20. Local retailers were hoping for more relief, but India has decided to retain the import duty on gold at 10 per cent.
On Wednesday, India raised import tariffs on a range of products, including soap, radial tyres, air conditioners, refrigerators, and, of course, diamond jewellery. This was done to offset the sharp decline in the value of the rupee in recent weeks. (On Thursday, one dirham was bringing in Rs19.77.)
“There was talk in recent weeks about gold being hiked to 12 per cent — that would have significantly widened the price difference between buying gold or jewellery here and buying in India,” said Abdulsalam K.P., Executive Director at Malabar Gold & Diamonds. “But gold import duties have been left intact.
“But the hike on diamond jewellery to 20 per cent will create significant opportunities for local jewellers. We haven’t been seeing enough of Indian visitors to the UAE making high-value jewellery purchases in recent months. With the hike to 20 per cent, it does present UAE jewellers with another opportunity.”
Current tariffs
Currently, there is a 5 per cent VAT on diamond — and gold — jewellery in the UAE. There is an additional 5 per cent customs duty for fully crafted diamond jewellery.
But local jewellers by and large have worked out ways where they do not have to pay up the customs duty. This they do by importing loose diamonds — on which customs duty does not apply — and ■ ■ ■ ■ ■ ■ ■ mountings, which are essentially the jewellery pieces without the set diamonds. “Where possible, jewellery is made imported in SKD (semi-knocked down) format and then assembled here,” said an industry source. “That makes diamond jewellery relatively competitive to retail prices in India and the rest of the Subcontinent.”
The timing on the import duty hike can prove mighty helpful for UAE jewellers. If they play it well, they can hope to tap increased buying interest ahead and during Diwali on November 7. More tourists from India, they hope, could translate into improved buying volumes in the all-important fourth quarter.
The first three quarters have been exceptionally difficult for the local/Gulf jewellery business. In the UAE, the roll-out of VAT squeezed domestic buying, while there was also lower buying support from visitors during the period.
But now, the UAE’s Federal Tax Authority has clarified the process for VAT-related repayments on purchases made by tourists, which will come into effect in the next few weeks. That, retailers anticipate, will also help revive demand by free-spending shoppers from abroad.
While the gold import duty remains untouched, the weakened rupee has widened the price for gold sold here and in India. On Thursday, 22 carat gold was priced at Dh136.25 (Rs2,693.13), while in India it was selling for Rs2,946.22 (Dh149.05).
“The higher retail price in India is principally due to the weakened rupee,” said Salam. “If there’s minimal improvement on the rupee level, UAE jewellers should see some benefits during the gold buying season in the fourth quarter of 2018.”