Friday Nov 15, 2024
Friday Nov 15, 2024
Tuesday, 13 August 2024 02:28 - - {{hitsCtrl.values.hits}}
|
Sri Lanka Gem and Jewellery Association President Ajward Deen
|
The Sri Lanka Gem and Jewellery Association (SLGJA), yesterday raised growing concern that the imposition of high taxes, including the Value-Added Tax (VAT) is driving businesses in the gem and jewellery industry to be relocated to other countries, which have more conducive environments for such business.
The imposition of 18% VAT on the import of rough and finished gemstones – although they are primarily intended for re-export or to be value added and sold locally to visiting foreign visitors for foreign currency – has changed the dynamics of the industry to the detriment of its sustainability in Sri Lanka. The SLGJA had previously warned that the imposition of 18% VAT would increase the risk of relocation to emerging competitor hubs like Dubai, India, Hong Kong and Thailand.
Each of these countries maintains single-digit VAT rates for their respective gem and jewellery industries. This disparity is now on the verge of rendering Sri Lanka’s gem and jewellery industry uncompetitive, with the livelihoods of over 600,000 employees in the formal sector being in jeopardy.
It was previously revealed that 70% of Sri Lanka’s gem and jewellery exports rely heavily on imported precious, rough stones, due to customer preferences, colour design, and quality. Approximately 99.9% of gems are either exported or sold to visiting tourists. Additionally, imports of gems into Sri Lanka have also reduced greatly as a result of the VAT, which in turn has affected the jewellery manufacturers and lapidaries to the point of closure, therefore resulting in vast unemployment.
Sri Lanka Gem and Jewellery Association President Ajward Deen said: “These taxes are a deterrent for dealers, who take risks with their own money. Banks do not provide loan facilities for this trade, which further complicates the situation for such businesses. It must be noted that the VAT on foreign currency sales, consumed overseas, without any refund mechanism, is also discouraging sales to tourists and not being competitive. Additionally, reducing the 36% tax on net profit an 18% VAT on imported goods could make Sri Lankan gems and jewellery more competitive globally.”
Sri Lanka has garnered a reputation for being an “Island of Gems” and has had a long and celebrated history in the gem industry. The industry has been an integral part of the Sri Lanka’s cultural heritage. The economic impact of the industry is substantial as it is a vibrant source of foreign exchange, which is vital for the countries stability. On a global scale, the country’s reputation for producing high-quality gemstones has been well established. In order to maintain this reputation, it is vital that the necessary support be provided, and that policies that enhance global competitiveness of Sri Lanka gems, such as tax reforms, and streamlined regulations be put in place.
