The last week of December 2017 witnessed an unprecedented increase in jewellery sales in the UAE as people were keen to profit from pre-VAT prices.
The reason being that everything that glittered, price wise, was gold, but it’s not too late.
Media statements reported that jewellery sales in the UAE were 5 times higher compared to the volume sold during the same period in 2016.
Techshi Research says UAE gems and jewellery market stood at $7.3 billion in 2016, and is projected to grow at a CAGR of 9% during 2016-2022, to reach $12.2 billion.
“We have seen very good footfall during the first week of the Dubai Shopping Festival in the past, but this year the pre-VAT sales seemed to have exceeded all expectations,” Tawhid Abdullah, chairman, Dubai Gold & Jewellery Group, was quoted by the media as saying.
Increased sales were also prompted by special offers on the occasion of the Dubai Shopping Festival.
What are these offers?
Gold buyers stand a chance to win up to 33 kilos of gold worth AED5 million in 33 days of DSF, the Dubai Gold and Jewellery Group (DGJG) said.
The Group’s mega jewellery promotion for DSF, which runs from December 26 to January 27, will choose 100 winners for the season, including a mega winner on the final day raffle who can take home one kilo gold.
Three lucky winners will get gold prizes with the first prize winner receiving 500gm gold, and the second and third lucky winners taking home 250gm gold each.
Also, Pure Gold Jewellers are offering customers more time to get used to the new tax system, by absorbing VAT on all gold and diamond products purchased throughout January.
For the full month of January, Pure Gold Jewellers will absorb the added tax on their products meaning that customers will not have to pay the increased prices any gold or diamond products, because Pure Gold Jewellers will pay it for them.
But what will happen after DSF offers are over and people are faced with the tough reality of having to pay VAT on every purchase?
Chandu Siroya, vice-chairman of Dubai Gold & Jewellery Group, said the jewellery sector witnessed record sales before the imposition of VAT but he expects demand to go down with the 5% VAT.
The good news is Siroya believes the slump will be short-lived as shoppers will get used to the higher prices due to five per cent VAT sooner than expected.
Shamlal Ahamed, managing director at Malabar Gold & Diamonds, told the media that VAT would not have an impact on the purchase behaviour of people for a long time. “It’s only a matter of time – a few weeks or a month, when the people get used to it and the business will come back to normal,” said Ahamed.
However, a study published in the economic times, Indian news agency, reveals that exports to the UAE have already dwindled after the government imposed 5 % customs duty on gold from the beginning of the year.
“Now the UAE government will be introducing 5% VAT which will further affect sales. More than half of plain gold jewellery manufactured in India is exported to the UAE,” Praveen Shankar Pandya, chairman, Gem & Jewellery Export Promotion Council, told ET.
The World Gold Council said that Gold jewellery demand in the UAE is “likely to falter” after rising briefly in the week before the imposition of VAT.
“The planned 5% VAT in Saudi Arabia and UAE may boost demand before the end of the year, although we believe the effect will be temporary,” the council said in the statement. “Demand is likely to falter once the new tax is in place.”