• Increased VAT renders local gem & jewellery less competitive

Many businesses in the Sri Lankan gem and jewellery industry are relocating themselves to countries like Thailand, Hong Kong and Dubai, amidst the imposition of 18% Value Added Tax (VAT), that has rendered locally produced gems and jewelries less competitive in the international market, The Daily Morning Business learns. 

Speaking to The Daily Morning Business, Sri Lanka Gem and Jewellery Association (SLGJA) President Ajward Deen said that given the local tax conditions are not favourable for gem and jewellery businesses, they procure gems from Africa and resell in the aforementioned markets, after relocating themselves to these countries.   

“The dealers in Sri Lanka are going to Africa to source coloured gemstones and they sell those gemstones in countries like Thailand, Hong Kong, and Dubai rather than coming to SL because of the VAT. Therefore, the businesses are migrating.”

He also pointed out that the buying power of people worldwide has slowed down. The demand for gemstones and all luxury goods is experiencing a decline because of the ongoing trade wars and decline in China's economy. 

Sri Lanka’s gem and jewellery industry depends on 70% of imported stones for exports and the intervention of VAT on these imports is a massive setback to the Industry.

Moreover, according to the Association, the Government doesn't realise that there is no consumption of these coloured gemstones in Sri Lanka. 99% is either exported or sold to tourists. Therefore, the Businesses are unable to recoup the 18% VAT they pay. The profit margins are too thin for a wholesale company to cover this tax.

According to SLGJA, the country is getting a huge number of foreigners, currently. Therefore, we need to increase the per-tourist expenses per day from $ 100-300 through promotions by enticing them to buy jewellery, spices, and so forth. 

Besides, the hardship the Gem and Jewellery industry faces in finding materials and merchandise. The Government has imposed 18% VAT on the tourist purchases. 

“It's ridiculous that the Government hasn't executed a refund policy, which is standard in other countries. Generally, foreign passport holders obtain a VAT reimbursement when they leave. Here, the Government charges an 18% VAT on foreign currency sales without offering a refund,” he said.