The government is to remove the 15 percent tax on gold and 14 percent income tax on the profits of gem and jewellery manufacturers, enabling the industry to become globally competitive yet again.
President Gotabaya Rajapaksa announced these decisions during a meeting to discuss the future activities of the Gem and Jewellery and related Industries State Ministry, held at the Presidential Secretariat, with the participation of industry stakeholders, recently.
However, the new tax revisions should be approved by the cabinet and thereafter parliament and therefore the government will include it in the budget 2021, informed sources said. .
The previous government in 2018 increased duty on gold imports to 15 percent, citing instances of gold smuggling into India, despite the objections of the industry. The practice of gold smuggling to India will definitely resume in a big way with the removal of taxes, an economic expert said adding that this will affect the local market as well.
Smuggling is becoming increasingly difficult to contain, regulators said. Officials from the Directorate of Revenue Intelligence say smugglers are regularly using the air route, taking advantage of airlines that club international routes with domestic ones using the same flight.
Local jewellery manufacturers who purchased gold from commercial banks will have to go after selected individual importers to buy their requirement paying a 5 percent commission at present, another jewellery trader said pointing out they cannot expect fair play from such gold traders.
The Commercial Bank and Bank of Ceylon are the highest gold importers among banks at present.