Authorities closer towards solution to resolve VAT debacle on gem and jewellery exports

The government authorities are moving closer to offer a remedy to resolve the crisis created with the imposition of the Value Added Tax (VAT) on the imported stones for exports, as the gem and jewellery exports trail behind the US $ 750 million gem and jewellery export target set for this year.

The imported stones used for exports were slapped with 18 percent VAT, along with a 2.5 percent of the Social Security Contribution Levy from this year, under the new tax policies. This move hurt the industry’s competitiveness globally, given around 70 percent of the exported stones are foreign stones.

“We have already been in discussions with the Finance Ministry; it’s all around at a good place. So, we should be able to (resolve this soon),” National Gem and Jewellery Authority (NGJA) Chairman and CEO Viraj De Silva told Mirror Business. 

He acknowledged that the industry is struggling to reach the US $ 750 million export target set for this year, due to the VAT issue. So far during the year, the gem and jewellery exports stand at around US $ 200 million, according to the NGJA.

In April, the total export earnings from diamonds, gems and jewellery declined by 14.14 percent year-on-year (YoY) to US $ 21.68 million. In particular, the export earnings from diamonds experienced a substantial 23.88 percent YoY decline in the month, as the diamond exports entirely depend on imports.

President Ranil Wickremesinghe has ruled out immediate changes to the tax policy, noting it’s not feasible. However, he has pledged to devise an effective system to enhance the gem and jewellery industry instead.
The government set an ambitious target to earn a US $ 2 billion export revenue from the gem and jewellery industry in 2025. (NF)