Sri Lanka Gem and Jewellery Association (SJGJA) members have issued dire warnings of serious damage with imposition of 18% Value Added Tax (VAT) on import of precious rough stones and local sales of gems and gem studded jewellery to tourists from 1 January 2024.
Terming the move as “unprecedented”, SLGJA said that the industry has always been GST/VAT exempted given the national importance in terms of earning much needed foreign exchange and employment. Formal gem and jewellery exports amounts to around $ 500 million whilst domestic sale to tourists and expatriates is estimated at $ 1 billion. The livelihood of over 600,000 persons and their families is dependent on the industry as well.
Despite overall negative performance, Sri Lanka’s export of gems, diamonds and jewellery in the first 10 months of 2023 grew by 16% to $ 440 million. Import of diamonds, precious stones and metals grew by 27% to $ 223 million. Total exports from Sri Lanka are down by 10%.
In that context as well as at a time when consumer preference is shifting to colour precious gemstones from diamonds, the timing of bringing the gem and jewellery sector under VAT is ill-advised. According to SLGJA members, with 18% VAT the entire industry will become uncompetitive. They cited low VAT in competing sources such as India (3%), Thailand (7%) and Dubai (3-5%).
Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough & Polished
