MoC directed to revise import policy for gold

The National Assembly Standing Committee on Finance and Revenue on Wednesday has directed the Ministry of Commerce to revise the import policy in order to import gold in the country.

While briefing on the issues being faced by different sectors of the country due to heavy taxation, FBR Chairman apprised that there is no change in the taxation of Jewelers in the Income Tax Ordinance, 2001. 

The Sector continues to avail concessionary reduced rate of withholding tax on import of semi-manufactured gold at the rate of 1 per cent, whereas, other industrial raw materials are generally subject to tax at import stage at the rate of 2 per cent. 

However, in the Finance (Supplementary) Act, 2022, the sales tax exemption and reduced rates on import and local sales of articles of jewelry have been withdrawn and these articles are now chargeable to sales tax at a standard rate of 17 per cent. 

He apprised that the exemption was withdrawn under the IMF program to remove economic distortions created by tax exemptions and reduced rates. Monetary gold, however, is still exempted at both import and local sales stages. 

He informed that the sector is also exempted from the levy of value added tax at the rate of 3 per cent at the import stage.

During the course of the discussion, the Jewelers Association Vice Chairman said that the sale of jewelry is liable to tax at the rate of 1.5 per cent on gold, 3 per cent on making and 2 per cent on the value of diamonds. However, the Finance Supplementary Bill proposes to increase it to a normal rate of 17 per cent.

He informed that out of approximately 36,000 jewelers only 50 plus are registered with sales tax, and such a harsh measure would result in complete closure of this documented sector and a fall in revenue. 

He also informed that in history, even when the reduced rate was not there, the exemption was available up to 90 per cent of the value. Similarly, jewelry across the globe is taxed at reduced rates i.e the rate of VAT on jewelry is 3 per cent in India.

He further informed that sales tax registered jewelers have to pay withholding tax at the rate of 9 per cent as all the suppliers in the supply chain are unregistered and out of the tax net. 

The committee directed the Jewelers Association Vice Chairman to make proposals for viable solutions to register the jewelers with sales tax. 

The committee also directed the FBR to reduce the withholding tax to 0.25 per cent and the Ministry of Commerce to revise the import policy so that gold could be imported.