The Economic Coordination Committee (ECC) of Pakistan’s caretaker Federal Cabinet has taken a significant step towards addressing challenges within the country’s jewellery sector by forming an inter-ministerial committee.
This move aims to develop a comprehensive plan focusing on boosting tax collection and fostering growth within the industry.
On February 14, 2024, the Commerce Ministry reported to the ECC about the current frameworks governing the trade of precious metals, gemstones, and jewellery under the Entrustment Scheme and Self-Consignment Schemes, as outlined in SRO 760(1)/2013.
These schemes are designed to facilitate both the export of jewellery made from imported and locally sourced precious materials and the general import of gold, subject to specific regulations.
The necessity for reform was highlighted by jewellery exporters who voiced concerns over existing regulations, labeling them as restrictive and attributing them to the downturn in export volumes.
This feedback prompted a thorough review, leading to the proposal of several amendments aimed at enhancing trade facilitation and competitiveness on the international stage.
Key proposed changes include revising export procedures under the Entrustment Scheme, adjusting gold import requirements, updating value addition norms to match regional competitors, and reinstating sales tax exemptions for imports of essential manufacturing inputs under the Export Facilitation Scheme managed by the Federal Board of Revenue (FBR).
Furthermore, to capitalize on e-commerce growth, amendments suggest permitting online business-to-consumer (B2C) sales of jewellery with specifics to be defined by the State Bank of Pakistan (SBP). Also, a collaborative effort between the Securities and Exchange Commission of Pakistan (SECP) and the SBP is expected to streamline the import process for bulk silver and gold, allocating a portion to exporters.
The ECC’s decision to form this committee is a response to the considerable untapped potential in Pakistan’s jewellery exports, as evidenced by the success of countries like the UAE and India in this sector.
Despite the industry’s significant size, it has been identified as a major area of tax evasion, underscoring the need for strategic interventions to ensure compliance and growth.
Comprising high-level representatives from the Commerce Division, SECP, FBR, and the Law and Justice Division, the committee is tasked with exploring these issues in depth to propose actionable strategies for the ECC’s consideration.
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The Securities and Exchange Commission of Pakistan (SECP) and the State Bank of Pakistan (SBP) are working together to simplify the process of importing bulk silver and gold, with a share going to exporters.