- Expects cost of production to rise 20% due to 15% import levy
- Says tourists will opt for other markets to buy jewellery due to cheaper prices
- Warns that some in the industry may resort to unlawful practices as costs escalate
- Says will meet President shortly to convey industry grievances
By Nishel Fernando
Sri Lanka’s gem and jewellery industry has urged the government to set-up a quota system for the importation of gold for exports and sale to tourists, in order minimize the impact from the 15 percent levy on gold imports slapped last week.
National Gem and Jewellery Authority (NGJA) statistics indicate that Sri Lanka exported gold jewellery and gems worth Rs. 2.33 billion in 2017. However, according Gem and Jewellery exporters, foreign exchange earnings from jewellery and gem sales to tourists are much higher, amounting approximately US$100 million annually.
Speaking to Mirror Business, a leading gem and jewellery manufacturer and retailer, on the condition of anonymity, said, “The 15 percent levy on gold will lead to a massive loss for the country in terms of foreign exchange earnings as we are no longer able to manufacture and sell gold-based jewelleries and gems to tourists at a competitive rate.”
“As the cost of products goes up in Sri Lanka, tourists will find gold jewellery and gems at much cheaper prices in Hong Kong, UAE, China and Thailand.”
The industry expects the cost of production to increase by about 20 percent due to the import levy.
Further, he warned that the gem and jewellery business, which is transparent at the moment, will resort to unlawful practices as the manufactures may try to procure gold from alternative sources.
Meanwhile, Speaking to Mirror Business, NGJA Director General M.L. Gammampila said that NGJA plans to negotiate a concessionary import duty rate with the Finance Ministry for gem and jewellery exports, in order to minimize the impact of the levy.
Gammampila said NGJA currently is in the process of determining the industry’s gold requirement for exports.
In addition, he noted that NGJA is in the process of identifying the jewellery manufacturers among the authorized gold importers, since gold imports and gold re-exports gap keeps widening.
The Finance Ministry said it imposed the levy due to the unprecedented increase in gold imports to Sri Lanka, which they suspect being are smuggled out from Sri Lanka, mainly to India, costing significant amount of foreign exchange to the country.
Sri Lanka’s gold imports increased 72 percent to 15, 757 kilograms last year, which was worth US$ 650 million. The Finance Ministry noted that there’s a large gap between the amount of gold imported and the usage of imported gold for manufacturing and re-export purposes.
A Sri Lanka Gem and Jewellery Association spokesperson said the government should have investigated the gold transaction carried out by unscrupulous gold importers rather than penalizing the entire trade.
“The government can easily ask for audit reports from gold importers and find out where the gold imports went. The government needs to resolve issues systematically rather than punishing the entire trade,” he stressed.
“This has been going on for years, with or without the import levy. The smuggling will continue as long as corrupt officials remain,” another member of Sri Lanka Gem and Jewellery Association noted.
Sri Lanka Gem and Jewellery Association is planning to meet the President Maithripala Sirisena during the next couple of weeks to discuss the gold import levy and other policy matters which are affecting the industry.