Why is the gold in Dubai cheaper than India?

The disparity in prices, particularly concerning bullion, can be attributed to taxation policies. In Dubai, gold transactions remain untaxed, allowing dealers to sell gold with a reasonable profit margin. Essentially, Dubai prices align with the International Spot Gold price in USD, multiplied by the USD/DHS exchange rate, plus the dealer’s profit.

  1. Taxation: Dubai does not impose any value-added tax (VAT) on gold, while India imposes a 3% GST on gold jewelry and a 10% customs duty on gold imports. As of June 2022, India has increased the import duty on gold to 15%, making it more expensive to buy gold in India.
  2. Lower making charges: The making charges for gold jewelry in Dubai are lower than in India. Making charges are the fees charged by jewelers for the labor and other expenses involved in making the jewelry. In Dubai, the making charges are usually a fixed percentage of the gold price, while in India, they can be as high as 25% of the gold price.
  3. Better quality: The gold quality in Dubai is known to be better than in India, and there is a wider variety of jewelry designs available in Dubai.
  4. Strong gold market: Dubai has a strong gold market, with a high demand for gold jewelry. This competition among jewelers keeps the prices low.

Conversely, in India, the government imposes a 10% import duty on all gold imports. To this, jewellers tack on logistics fees, minting charges, and a 3% GST. Consequently, the Indian pricing equation incorporates the International Spot Gold price in USD, adjusted by the USD/INR exchange rate, and further augmented by the 10% import duty, logistics expenses, minting charges, and the 3% GST.

As a result, the cost of purchasing gold in India is approximately 15% higher than in Dubai. To illustrate, at the time of writing, the International Spot Gold price stands at USD 1881.9 per ounce, with a USD/INR rate of Rs. 64.5. A reputable bullion seller in Bangalore, such as Bangalore Refinery, offers 1 ounce of 24kt gold with a premium of 16.3% over the spot price, which is typically at least 11% more than Dubai’s pricing.

By Alexandre Laurent

Alexandre Laurentl is working in the jewelry and investment gold since 2002. Alexandre graduated from The Normandy School of Business and from the University of Perpignan a Bachelor of economics in 1995.

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