KARACHI: The country’s official gold import remained suspended in the last quarter (March-June) of outgoing 2023-24 due to a policy change in February.

According to data from the Pakistan Bureau of Statistics (PBS), gold imports during the July-February FY24 stood at 262 kg ($17 million), compared to 342 kg ($21 million) in FY23.

Pakistan Gems Jewellery Traders and Exporters Association (PGJTEA) Habib-ur-Rahman told Dawn that under SRO760, two schemes exist for gold import —the Entrustment Scheme and the self-consignment (locally procured).

On Feb 22, the Federal Board of Revenue (FBR), without any prior notification, lifted the 18pc sales tax exemptions on the import of gold (under SRO760), leading to a complete halt in the import of advanced gold (received from foreign party) starting from the date mentioned in point number 2 (above) until July 8.

Doubling of advance tax to 2pc triggers relocation of businesses abroad

He said the association had sent numerous requests to the government for necessary action, and later, the government restored the sales tax exemption (18pc GST), but only for the “Entrustment Scheme” in the Finance Bill 2024.

He believed that from February to July, a wrong decision taken by the FBR had incurred losses to the government in gold jewellery foreign exchange amounting to approximately $15m.

Mr Rahman said the government still has not completely resolved the issue of including sales tax exemptions in the gold jewellery sector, as the exemption only remains for the Entrustment Scheme and not for the self-consignment (locally procured) scheme.

Increasing the advance income tax in the finance bill from 1pc to 2pc has made it almost impossible for the jewellery sector to thrive as the value addition formula of 8pc, 12pc and 13pc is pegged to the gold value. He added that clause (10) of the SRO760 is a wrong formula as the gold rate fluctuates.

He said the association had been arguing on this issue for the past 11 years, urging that the value addition (labour charges) should be fixed to $1, $1.5, and $2.5 per gram so that when the gold price changes, we don’t face the repercussions of paying more labour charges.

As per the current gold rate, value addition adds up to $10 per gram. The government should realise that even foreign buyers (jewellery retailers) don’t sell the jewellery at $10 per gram. This wrong calculation for the last 11 years in the SRO760 has proved a disadvantage to jewellery exports.

Now, the government has senselessly also added a 2pc advanced income tax, which was 1pc previously. How does the government expect that this industry will survive? Unfortunately, they are unaware that due to this senseless decision, gold jewellery manufacturers have started shifting their businesses to other countries, including Oman and Dubai.

Despite all odds, the country’s jewellery exports had surged by 43pc in FY24 to $11m from $7.7m in FY23.

Published in Dawn, July 21st, 2024