KARACHI: The export of gold jewellery from Pakistan is in jeopardy due to the Federal Board of Revenue's (FBR) new policy and tax measures. With lower exports, Pakistan will not lose foreign exchange but also the unemployment of thousands of people associated with the jewellery sector is affected.
Addressing a press conference on Tuesday at Karachi Press Club, Habib-ur-Rahman Chairman Pakistan Gem and Jewellery Traders and Exporters Association (PGJTEA) along with Akhtar Khan Tessori Patron in chief of association informed that the Prime Minister House along with the Federal Ministry of Commerce and Ministry of Finance had assured to restore sales tax exemption on import of advance gold by foreign buyers for export of gold ornaments, but this commitment not be fulfilled in the budget. On the occasion, - Farhan Akhter, Dr Khuwaja, Arsalan Shahid, Kashif Rehman and Khalid Faraz were also present.
Habib-ur-Rahman informed that the exemptions of 18 percent sales tax on import of advanced gold by foreign buyers for export of gold jewellery was abolished in February 2024, making it difficult to continue exporting gold jewellery. With the new tax initiative, under the (Entrustment Scheme), exporters have to pay 18 percent sales tax in advance on the import of gold by foreign buyers, which will be refunded after export, but even for the largest exporter, it is not possible to pay 18 percent sales tax in advance, he added.
He informed that gold worth millions of rupees is being imported and a huge amount will be required to be deposited as sales tax, which is many times more than the value addition and profit, and then to complete a long and complicated time-consuming procedure for the refund of this sales tax. In this way the capital of the exporters will be blocked for many months, he mentioned.
The export industry of gold jewellery is currently suffering from a severe crisis. Exports are suspended and a new move by the FBR has dashed the exporters' hopes.
Habib said that around 100 companies in Pakistan are exporting gold jewellery, out of which 25 top exporters have decided to shift their business from Pakistan to Middle East and UAE and many have shifted their business to Dubai.
“This will lead to significant reduction in Pakistan's exports. According to estimates, if the sales tax exemption is not restored for the export of gold ornaments, then during the next financial year, the export of gold ornaments, which is $100 million at present, will be reduced to one or two million dollars,” he mentioned.
Exporters said that since the end of sales tax exemption in February 22, not even a gram of gold was imported under the entrustment scheme for making gold ornaments, but at the same time gold worth $12 million was returned to the buyers. The orders were cancelled from Pakistan and transferred to India, thus Pakistan had to lose the foreign exchange of more than $ 0.5 million received in the form of value addition, but the buyer parties also diverted to India, they added.
They said that the gold jewellery exporters suffered a sharp decline due to the introduction of SRO 760 in 2013-14 and the export of gold jewellery fell by 95 percent due to strict conditions and complex procedures imposed through this SRO.
The Association proposed amendments to SRO 760, which the Ministry of Commerce and the Ministry of Finance was agreed to in the budget 2024-25, but the promise is not fulfilled in the new budget.
“If the Federal Ministry of Finance does not restore the sales tax exemption, exports of gold jewellery from Pakistan will be completely stopped, which will affect the families of 10,000 gold jewellery artisans along with the loss of valuable foreign exchange,” they warned.
Association has demanded immediate restoration of sales tax and income tax exemption on gold imported for export of gold ornaments and removal of obstacles in the way of export by amending SRO 760.
In addition, the federal government in the federal budget has ended the fixed rate regime for the export sector and 29 percent tax was imposed. This move will also affect the gold jewellery export sector like other export sectors, Habib mentioned.
Copyright Business Recorder, 2024
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