Gem and jewellery industry welcomes removal of import duty on gold imports, income tax on profits

• President orders to remove 15% import duty on gold imports and 14% income tax on industry profits 
• Stakeholders say move will make industry competitive again globally 
• President instructs state banks to lend Rs.1mn to jewellery manufactures at 4% to import gold

By Nishel Fernando
Sri Lanka’s gem and jewellery industry yesterday welcomed President Gotabaya Rajapaksa’s decision to remove 15 percent import duty on gold and 14 percent income tax on the profits of gem and jewellery manufacturers, enabling the industry to become globally competitive yet again. Rajapaksa announced these decisions during a meeting to discuss the future activities of the Gem and Jewellery and Related Industries State Ministry, held at the Presidential Secretariat, with the participation of industry stakeholders, yesterday.

“This government is very actively focusing on developing this industry to be within top five foreign exchange earners of the country, which we think is very much possible because Sri Lankan industry has the potential and capability to do that. It is a matter of enabling the right policy framework and taking off the bottlenecks,” a spokesperson of Chinafort Gem and Jewellery Traders Association (CGJTA) told Mirror Business. 

The previous government in 2018 increased duty on gold imports to 15 percent, citing instances of gold smuggling into India, despite the objections of the industry. The CGJTA spokesperson pointed out that this move had made the Sri Lankan gem and jewellery products globally uncompetitive, due to the sharp increase in prices. “If our jewellery is competitive enough for tourists to buy from Sri Lanka instead of Dubai or Hong Kong or Thailand, we, as a country, stand to gain an enormous amount of foreign exchange from tourism. The policy decision taken by President Rajapaksa is going to render the Sri Lanka jewellery industry globally competitive once again,” he added.

In addition, Rajapaksa also instructed the state-owned banks to provide a Rs.1 million loan, at a concessionary interest rate of 4 percent, to jewellery manufacturers and traditional jewellers to purchase gold.

The industry estimated that Sri Lanka earned around US $ 200-250 million via indirect export of jewellery, which takes place through the sale of jewellery to tourists, prior to the duty hike.  
The industry sees an export potential of US $ 1-1.5 billion in the short term, from direct and indirect exports. Commenting on smuggling gold into other countries such as India, to take advantage of the favourable price arbitrage, he emphasised that accountability and enforcement must be utilised to curb such activities. “It’s a matter of enforcement. We are very confident that the government will carry out that part very well. If someone is buying an unusual amount of gold, it can be monitored and traced,” he noted. The CGJTA also welcomed the policy reversal to re-grant the income tax concession given to the gem and jewellery industry since 1971, which was removed with the new Inland Revenue Act of 2017.

The President’s Media Division in a statement noted that the removal of the income tax concession in 2017 led to a situation where the industry players become reluctant to reveal the actual income earned from the export of gems and jewellery. During the meeting, Gems and Jewellery Related Industries State Minister Lohan Ratwatte put forward 14 proposals to address the bottlenecks that hinder Sri Lanka’s ability to become the hub for gems. During the meeting, Ratwatte highlighted the importance of facilitating the importation of high-priced gems unique to other countries and are not found in Sri Lanka and maintaining a gem reserve.

With regards to gem mining, it was decided to remove the barriers that had obstructed the release of uncultivated lands with gem deposits belonging to plantation companies and to take over control of these lands for the benefit of the mining industry. Moreover, Rajapaksa advised all relevant institutions to be brought into one place to avoid delays in the issuance of gem mining licences and to expedite the construction work of the proposed Gem Trading Complex and Training Centre in Demuwawatha, Ratnapura.