By Chittaranjan de Silva
The cabinet has approved the memorandum to
abolish the Value Added Tax (VAT) imposed on the gem and
jewellery industry. The VAT imposed on this industry since
January this year has impacted on trade according to data
released by the Ministry of National Enterprise Development.
Minister of Advanced Technology and National
Enterprise Development, Rohitha Bogollagama considering the
appeals of the industrialists had moved the cabinet paper to
abolish the 15% VAT, which is expected to boost the industry in
Minister Bogo-llagama had noted in the cabinet
memorandum that significant growth has been recorded in the gem
and jewellery industry with the liberlisation in 1996 and the
subsequent removal of duties and other fiscal levies. However,
with the imposition of the 15% VAT ,effective from January 1,
this year the industry has been adversely affected.
In 2004, gem exports, which amounted to US$ 43.8
million upto June had declined to US$38.3 in the same period
this year. Considerable trading which was done formally, is now
done informally. Therefore, the minister has pointed out the
need to rescue the industry from it present plight and put it
back on track.
Accordingly, approval has been obtained to
exempt from value added tax, both rough and cut polish gems,
diamonds, precious metals, which include Gold, Silver and
Platinum, informed sources said.
Minister Bogollagama had earlier told the Export
Investment and Enterprise Development Forum of his intension to
address shortcomings and bring about reforms in the gem and
jewellery trade. According to him, the indsusty has a good
potential to earn more foreign exhange to the country. He has
advised the entrepreneurs in the trade to make use of the
facilities provided by the SME Bank to obtain necessary
facilities to develop their industries by improving quality and
He has said that government wishes to welcome
macro and medium level investors to Sri Lanka through the
introduction of reforms, with plans being drawn to encourage the
mining sector with special concessions. After the removal of VAT
on precious metal, the gold trade is also likely to pick up,
sources said pointing out that prices of Gold in the local
market may decline as a result.