Single tax reform aims to unlock SL’s gem wealth
Sri Lanka’s gem and jewellery industry is set to enter a decisive new phase as the Government moves forward with a landmark tax reform designed to simplify trade, curb illegal exports and revive a sector with vast unrealised economic potential.
At the heart of this policy shift is a proposed single tax per parcel on gemstones imported into the country for value addition, an initiative policymakers believe could restore confidence, transparency and growth across the industry.
The new taxation is aimed at symplifying this sector currently facing complex taxes (VAT, Cess, duties) that have historically discouraged formalisation, leading to high informal trade, illegal exports, and a significant loss of potential revenue.
This has prompted the government to proposed a “single tax per parcel” to curb illicit activities and boost legitimate exports, though challenges with smuggling and inconsistent policies persist, Industry Minister Sunil Handunnetti disclosed. Cabinet approval has already been granted for the introduction of this single-tax system, and the next step is to present the proposal to Parliament for approval during the first parliamentary session of the New Year 2026, he added.
The current import policy involves exemptions from Customs Duty and VAT on precious metals/gems, but faces recent complexities with new taxes (like 18 per cent VAT/other levies on imports/sales to tourists) imposed in 2024, a senior high official of the Finance Ministry said. It has lead to industry concerns, though efforts are underway for simplification, including a proposed single tax for value addition and tourist refunds (TVRS) to boost competitiveness.
The aim of the new taxation is value addition, moving from raw exports to finished products, with a new “single tax per parcel” approved for imported rough gems to encourage processing.
A leading gem exporter and importer told the Sunday Times Business that high taxes encourage under-invoicing, smuggling (gems brought in as hand luggage to avoid duties), and mis-declaration of goods to avoid levies, created avenues for fake/overvalued imports.
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