VAT on gold jewellery won't deter buying in UAE, says retailer

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26 March 2017
But UAE's top retailer admits they're wary of passing extra costs to their customers

By Cleofe Maceda, Senior Web Reporter

Dubai: A five per cent tax in the UAE won’t discourage consumers from buying gold jewellery, a top retailer told Gulf News.

Karim Merchant, CEO and managing director of Pure Gold Jewellers, said it is common practice in most countries to charge VAT on products not considered essential - and that both businesses and consumers must “accept the new reality.”

“Most countries charge VAT and that does not mean people stop buying. We do not believe VAT will deter jewellery customers in the UAE,” Merchant gold Gulf News.

Beginning January 2018, states across the Gulf Cooperation Council (GCC) region will implement VAT. The levy will apply to purchases of goods services, with the exception of certain products that are considered essential. Tax experts have said that since ornaments are not considered part of the basic goods category, gold fans in UAE can expect a 5 per cent tax on their purchases.

“The Ministry has indicated that only certain basic essentials may be exempt. So we can expect to see VAT on all luxuries. Gold purchased for investment purposes however, for instance, gold bullion, may get an exemption as is the case in some countries,” said Rakesh Pardasani, partner at financial consultancy firm RSM UAE.

Merchant, however, said that they are still very concerned about adding extra costs to their sales transactions. “We are always very wary of passing on increased costs to our customers.”

But he was quick to point out that the gold jewellery market in the UAE is known for offering buyers great value. “UAE jewellery industry’s reputation is not just built on competitive pricing, but also on the assurance of quality and vast range of designs,” said Merchant.

“These unique selling points are strongly instilled in the minds of customers. We must all accept the new reality and adjust our business models to suit it.”

Other gold retailers contacted by Gulf News declined to issue a comment.