Pakistan’s Gold Import Suspension in Q4 FY24 Impacts Jewellery Sector
Policy Change and Taxation Issues Cause Significant Setbacks
KARACHI – The country’s official gold import was suspended in the last quarter (March-June) of the outgoing fiscal year 2023-24 due to a policy change in February.
Import Data and Policy Shift
Data from the Pakistan Bureau of Statistics (PBS) shows that gold imports during July-February FY24 were 262 kg ($17 million), down from 342 kg ($21 million) in FY23.
Habib-ur-Rahman of the Pakistan Gems Jewellery Traders and Exporters Association (PGJTEA) explained to media that the gold import operates under two schemes: the Entrustment Scheme and the self-consignment (locally procured).
Tax Exemption Withdrawal
On February 22, the Federal Board of Revenue (FBR) abruptly lifted the 18% sales tax exemption on gold imports under SRO760, halting the import of advanced gold from that date until July 8.
Impact on Jewellery Sector
Habib-ur-Rahman stated that despite numerous requests from the association, the government only restored the 18% GST exemption for the Entrustment Scheme in the Finance Bill 2024.
This decision led to an estimated $15 million loss in gold jewellery foreign exchange between February and July.
Ongoing Issues
Rahman highlighted that the sales tax exemption issue remains unresolved for the self-consignment scheme. The increase in advance income tax from 1% to 2% in the finance bill has also created challenges, as the value addition formula is linked to fluctuating gold prices.
Long-standing Dispute
The association has been contesting the value addition formula in SRO760 for 11 years, advocating for fixed labour charges per gram instead of a percentage-based system. Currently, value addition costs up to $10 per gram, which even foreign buyers do not bear.
Industry Relocation and Export Growth
The recent tax increase has prompted some gold jewellery manufacturers to relocate to countries like Oman and Dubai. Despite these challenges, Pakistan’s jewellery exports grew by 43% in FY24, reaching $11 million from $7.7 million in FY23.