UAE Jewellery Demand Still Dulled by VAT

Leading Indian jewellers operating in the United Arab Emirates have said that business has taken a massive hit ever since the 5 per cent value added tax (VAT) imposed by the government came into force on January 1. This has taken the shine off the ongoing Dubai Shopping Festival, which attracts tourists from across the world for making big ticket purchases, they said.

“There has been a nearly 75 per cent decline in sales since VAT came into being,” said Joy Alukkas, chairman of Joyalukkas group, a major player in the Gulf Cooperation Council states. “Movement of gold jewellery is very slow now. It will take time for the market to accept the new tax regime.” Joyalukkas group has 22 outlets in the UAE and nine in Saudi Arabia.

Alukkas said that Saudi Arabia too has introduced 5 per cent VAT on gold jewellery from January. According to the World Gold Council, weak oil prices and rising costs had led to a 9 per cent decline in gold jewellery demand in Saudi Arabia in the third quarter of 2017 from a year earlier while the UAE showed a 10 per cent decline. Overall gold jewellery demand in West Asia dropped 4 per cent to 40.9 tonnes, the lowest since at least 2014, the council had said in a report.

The introduction of 5 per cent VAT on gold comes at a time when crude oil prices are on the upswing. “It will take at least 3-4 months for VAT to settle down and business to bounce back,” said Alukkas. Rajiv Popley, director, Popley & Sons, which has operations in Dubai said that Dubai Shopping Festival is the main season for jewellery sales. “Though there are offers on gold purchase, we do not see sales going up much this year. Sales may go up 10-15 per cent in comparison to 25 per cent last year,” he said.

The Dubai Shopping Festival started on December 26, 2017 and will continue till January 27. “Since sales has slowed down due to introduction of VAT, exports from India will get affected in the short term,” said Sabyasachi Ray, executive director, Gem & Jewellery Export Promotion Council (GJEPC).

“However, only 10 per cent of the gold exported to Dubai is consumed and the rest is re-exported. A lot of gold jewellery is routed to global markets through Dubai. We have to see how re-exports are being handled in the VAT regime,” he said. Exports to the UAE had already dwindled since the government imposed 5 per cent customs duty on gold from the beginning of 2017. According to GJEPC figures, exports of gold jewellery fell 6 per cent in the first eight months of the current financial year from the previous year to Rs 14,733.83 crore.

Courtesy: Economic Times