Mumbai: Dubai has imposed a 5% import duty on gold and diamond jewellery, a move which is likely to hurt Indian exports at a time when demonetization has hit business at home, reports The Economic Times.

The new levy may, however, boost bridal jewellery sales in India because many Indian shoppers had turned to Dubai owing to the cheaper gold there and the price difference may no longer be attractive enough.

“Nearly 45-50% of gold jewellery consumed in Dubai goes from India. It will hurt some big exporters to Dubai from India,“ said Rajiv Popley, director of Mumbai-based jewellery firm Popley & Sons. Jewellery design in Dubai is expected to get a major boost as dependence on imports from India reduces, executives said. The import duty is being seen as a precursor to the introduction of a value added tax regime in Dubai, they said.

Rajesh Mehta, chairman of Rajesh Exports said that import duty introduced by Dubai would not apply to all exports from India to the Emirates. “Our jewellery is mostly re-exported from Dubai to other parts of the world. There is no duty on jewellery that is imported for export. The jewellery export re-export. The jewellery exported by us for local use in Dubai will attract a 5% duty,“ he said. India’s handmade jewellery is highly popular in Dubai, where Gold Souk, a prime market for the yellow metal and similar to Zaveri Bazar in Mumbai, houses many prominent wholesale and retail jewellers.