With the implementation of a five per cent value-added tax (VAT) in the UAE from January 1, the prices of gold and diamond jewellery in Oman could slightly increase in the coming months, according to industry executives.
Local jewellery stores expect that VAT could make imports of bullion-based ornaments from the UAE a bit costlier going forward, though they are awaiting more clarity over the issue before raising the prices. Total value of Oman’s jewellery imports stood at RO325mn in 2015, according to a report by the National Centre for Statistics and Information (NCSI). Industry executives estimate that nearly 80 per cent of jewellery products sold in Oman are either designed and polished or manufactured at units located in the UAE.
“There could be some impact on prices going forward, probably in the coming months. In our case, there wouldn’t be any impact on prices immediately as we have already preponed buying and built stock for coming months in advance,” Anto Ignatious, regional manager at Joyalukkas, said. T S Kalayanaraman, chairman and managing director, Kalyan Jewellers, said,“There is a possibility that there could be a marginal increase in prices.”
Kalyanaraman, however, added, “We will have to see the fine print of the UAE VAT rules before determining the extent of price hike. Having said that, we will take necessary steps to ensure that we provide a competitive proposition to customers.”
Echoing similar views, Karim Merchant, group CEO and managing director of Pure Gold Jewellers, a Dubai-based firm, said,“The impact on customers will be only five per cent. So, if the customer was previously paying RO10 for a product, he or she will only pay RO10.5 after VAT implementation.”
Most gold jewellery stores and showrooms in Oman so far have not passed on the increase in prices to customers as they are awaiting more clarity over the issue, and most of them had advanced their purchases anticipating increase in taxation. “Ideally there shouldn’t be any charges on goods exported from the UAE. But as there is not much clarity over the issue, what could happen is that many people unknowingly could incur these additional expenditures,” Alkesh Joshi, tax parter at EY Oman, said.
He added that there is much ambiguity, and clarification over the issue has been sought from the authorities. The draft tax issue released by the UAE government defines VAT as five per cent tax imposed on import and supply of goods and services at each stage of production and distribution, including that is a ‘deemed supply’.
However, 99 per cent pure gold bars have been exempted from VAT as they are termed as commodities and regulations regarding commodity trade would be applicable on that. Industry executives believe that the attractiveness and demand for gold products in Oman and the GCC would not be diminished due to a slight increase in prices. A large number of expatriates in the region prefer to buy gold ornaments while going back to home country due to difference in prices of the commodity in the GCC and other regions.
“Gold jewellery in India and other countries is still far more expensive than in the Gulf region. There is also a ‘trust issue’ regarding purity and lack of varieties, along with import tax on gold jewellery, which is very high in India,” Merchant said. Echoing similar sentiments, Kalayanaraman said, ”While price arbitrage is a consideration, expatriates buy because of assured quality and trendy designs. We don’t believe demand will be affected in Oman.”
Najeeb K, regional manager, Malabar Gold and Diamonds, believes that the implementation of VAT in the UAE could also boost local sales in Oman. “Many people think that prices in UAE are cheaper than Oman. So, if there is an increase in prices in the UAE due to VAT, many would prefer to buy from Oman,” Najeeb added.