As 70% of Sri Lanka’s gem and jewellery industry depends on imported stones for exports, the intervention of Value Added Tax (VAT) on these imports is a massive setback to the industry, The Daily Morning Business learnt.     

Speaking to The Daily Morning Business, Sri Lanka Gem and Jewellery Association (SLGJA) , President Ajward Deen said: “It is very difficult to make the industry forward  at the VAT rate from 0-18%. Moreover, 2 out of 3 stones which are exported are foreign stones.”

He also noted that there are numerous dealers globally who send stones to Sri Lankan lapidaries to cut and return. 

However, when the stones are sent to Sri Lanka 18% VAT is charged along with a 2.5% of the Social Security Contribution Levy Act. 

Therefore, the fees levied to recut is hardly anything. The cutting charges are around two dollars a carat and in order to pay the heavy load of duty hardly there’s a profit whereas a few lapidaries are closing up, currently, Deen said.

He added that a diamond factory in Sri Lanka has planned to enlarge the operations, however, due to the existing circumstances, they have all taken a step backwards. 

According to SLGJA, “Orders are there, if the conditions are feasible to do so. Our businesses have been exempted for the last so many years and we are not competitive in the global market.”

Therefore, the buyers will look for other places to do their cutting in countries such as China and Bangkok where they can do it without subjecting themselves to any taxation or bureaucracy. 

Deen stated that the people who bring foreign stones for them to export will take them straight to Dubai or Bangkok that the industry will start losing from all sides. 

Primarily, the gem and jewellery industry is a pure foreign exchange industry since there is no domestic consumption at all. The industry survives only if it is exported or sold to tourists, Deen stressed.