A recent study by the Competition Commission of Pakistan (CCP) reveals that Pakistan’s gold market is largely operating outside the formal economy due to a complicated tax structure, weak enforcement, and poor coordination between federal and provincial authorities.
The CCP’s report on the gold sector points out that overlapping and inconsistent Statutory Regulatory Orders (SROs) issued by the Federal Board of Revenue (FBR) discourage formal business practices and encourage smuggling and under-invoicing.
Regulation of gold trade is handled by multiple bodies, including the Ministry of Commerce, FBR, State Bank of Pakistan, Trade Development Authority, and Pakistan Gems and Jewellery Development Company. This fragmented oversight has led to conflicting rules on taxes, documentation, and trade approvals, raising compliance costs for traders.
Key rules affecting the sector include SRO 760(I)/2013 on import and export controls, SRO 924(I)/2020 on anti-money laundering, and SRO 297(I)/2023 on differential tax rates. Gold imports face an 18% sales tax under the Sales Tax Act, 1990, with reduced rates for domestic jewellery manufacturers, while the Income Tax Ordinance, 2001 imposes withholding and presumptive taxes. The suspension of SRO 760 has further increased regulatory uncertainty.
The study also highlighted challenges for exporters, such as a 1% cash margin requirement, duplicate taxation on exports and withdrawals, costs of ATA Carnets via private agents, and delays from mandatory random customs testing of jewellery. Weak enforcement of hallmarking standards was cited as another factor favoring informal trade.
While the FBR is responsible for taxation, customs, and anti-smuggling measures, structural inefficiencies and limited coordination with provincial authorities reduce its effectiveness. Porous borders with Afghanistan and Iran remain key channels for illegal gold inflows.
Although measures like mandatory CNIC reporting for high-value transactions, trade track-and-trace systems, and cash reporting have been introduced, weak implementation and disconnected systems have limited their impact.
The CCP concludes that unless policies are harmonized, institutional coordination improved, and enforcement strengthened, transparency and fair competition in Pakistan’s gold market will remain a challenge.
