Business
Abolition of VAT on gems and jewellery to propel industry

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 future.

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 adding value.

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.

 

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