Sri Lanka explores local gold refinery as IMF regulations delay import tax relief for jewellers

SLGJA President Akram Cassim addressing the gathering. 

Pic by Kithsiri de Mel

By Nishel Fernando 

Sri Lanka’s gem and jewellery sector is unlikely to see immediate relief from high gold import taxes due to ongoing International Monetary Fund (IMF) regulations, but authorities are actively exploring the establishment of a local gold refinery to ease raw material shortages for the industry.

Addressing concerns raised during the official media launch of the FACETS Sri Lanka 2027 exhibition, National Gem and Jewellery Authority (NGJA) Chairman Prof. S. P. Chaminda explained that treating gold purely as an industrial raw material is complicated by its status as a financial reserve asset.

He noted that the government’s fiscal flexibility is currently heavily constrained by the macroeconomic parameters set under the ongoing IMF programme.

“The government is in a very difficult situation to reduce tax on gold. Because gold is not only used for jewellery production, it’s sometimes used as a kind of reserve by people,” Prof. Chaminda said during the Q&A session. “People try to reserve the gold, that’s a problem. So, with IMF regulations, we cannot reduce the tax on gold.”

To circumvent the heavy taxation that has crippled legal gold imports, the government is evaluating a proposal to set up a local refinery. Operating as a Board of Investment (BOI) project, the facility would import secondary or mixed metals to be refined locally, providing a creative solution to current import barriers. Speaking further on the sidelines of the event, Prof. Chaminda revealed the technicalities of the proposed operation. 

“There are some companies coming in and they are trying in a different way to bring the gold here. They will bring it here like secondary processed gold,” he explained. 

This facility would cater to domestic manufacturers, supply the Central Bank, and add value for re-export. “So in that case, probably we can have a gold refinery here. Hopefully, in coming years, we can reduce the gold tax,” Prof. Chaminda noted, linking the BOI project to long-term tax relief strategies.

The heavy taxation on gold imports stems from the country’s recent severe foreign exchange crisis. Historically, Sri Lanka allowed relatively free gold imports, but as currency pressures mounted, the government imposed steep import duties to curb dollar outflows and prevent arbitrage. Current import and other taxes on gold sit in excess of 45 percent, a policy that effectively halted legal bullion imports and inadvertently fuelled an underground smuggling network. While these taxes helped stabilise the currency and met international regulatory requirements, they have severely disadvantaged local jewellers who struggle to compete with international hubs like Hong Kong, where raw materials flow freely without duty. Sri Lanka Gem and Jewellery Association (SLGJA) leadership acknowledged the industry’s frustration over the uncompetitive tax environment but admitted that comprehensive tax reform for gold will take time.

“Gold tax and imports is one of the issues that have also been taken up with the government, and that, I don’t think will have a solution immediately,” SLGJA President Akram Cassim noted. 

“That might take a little longer than the other issues we are working on. There are so many problems that were highlighted, so they’re working on each one separately. And hopefully we should have some resolution to some of the other issues soon.”

Beyond gold taxes, the SLGJA is pushing for broader deregulation to simplify export procedures and enhance Sri Lanka’s competitiveness as a global gem trading hub. Industry leaders at the event highlighted that continuous negotiations with the government have already yielded positive results, such as the implementation of a Value Added Tax (VAT) refund system for tourists at the airport last year. The industry remains hopeful that as macroeconomic environment stabilises, further regulatory bottlenecks, including corporate tax burdens on exporters, will be systematically dismantled to propel the sector’s growth back toward the US$1 billion export mark.