The Sri Lanka Gem and Jewellery Association (SLGJA) has raised concerns that high taxes, including an 18% Value-Added Tax (VAT), are pushing local businesses to move overseas. This trend could jeopardize the future of the industry in Sri Lanka.
The VAT applies to both rough and finished gemstones. These gemstones are often intended for re-export or for sale to foreign visitors, generating foreign currency. The SLGJA argues that this tax is harming the industry’s sustainability in Sri Lanka.
The SLGJA had earlier warned that high VAT rates might drive businesses to relocate to competing hubs like Dubai, India, Hong Kong, and Thailand, where VAT rates are much lower. This disparity is making Sri Lanka’s gem and jewellery sector less competitive and threatening the jobs of over 600,000 employees in the formal sector.
“These taxes discourage dealers who risk their own money. The lack of loan facilities from banks further complicates the situation for these businesses,” said SLGJA President Ajward Deen.
The VAT on foreign currency sales, which cannot be refunded, is also deterring sales to tourists. Sri Lanka, known as the ‘Island of Gems,’ has a strong global reputation for high-quality gemstones.
To preserve this reputation, Deen emphasizes the need for supportive policies, including tax reforms and streamlined regulations, to enhance the global competitiveness of Sri Lankan gems.