The Karachi Chamber of Commerce and Industry (KCCI) has formally requested the federal government to authorize the export of gold, provided that a minimum of 20% value is added during processing. This initiative, according to the KCCI, holds the potential to inject new life into the currently sluggish precious metals industry and substantially increase the nation’s export earnings.
In their comprehensive budget recommendations for the fiscal year 2025-26, the KCCI drew attention to persistent policy discrepancies that have hindered the growth of gold and jewelry exports under the regulations outlined in SRO 760(I)/2013. The chamber highlighted a critical issue: despite this SRO offering exemptions from duties and taxes on imported precious metals intended for export, the corresponding amendments to the Sales Tax Act were never enacted.
This oversight has resulted in a situation where only gold imports under the Entrustment Scheme benefit from sales tax exemption, as per Entry No. 178 of the Sixth Schedule. Conversely, imports made under the Self-Consignment Scheme, along with any unsold jewelry, are still subject to a significant 18% sales tax.
The KCCI emphasized that this inconsistent tax structure has rendered gold trading economically unfeasible. While imported gold bullion faces an 18% sales tax, locally manufactured jewelry is taxed at a much lower rate of 3%. This disparity has not only created confusion within tax administration but has also pushed a considerable portion of the industry into the informal sector, thereby restricting export expansion and discouraging formal commercial activities.
Despite the intended purpose of SRO 760(I)/2013, the KCCI pointed out that gold exports have stagnated at a modest $50 million annually due to these policy mismatches. To rectify this, they have proposed aligning the Sales Tax Act with the SRO by revising Entry No. 178 of the Sixth Schedule to explicitly include “import of gold and unsold jewelry” within the scope of the exemption. Furthermore, the chamber advocated for the reintroduction of a zero-rating for gold by either reinstating Entry No. 37 in the Sixth Schedule or, as an alternative, implementing a 1% tax through the Fifth Schedule.
In addition, the KCCI recommended the implementation of stricter regulations to prevent the return of unsold jewelry under export arrangements, thereby safeguarding against the potential misuse of export incentives.
The KCCI firmly believes that by permitting gold exports with a minimum of 20% value addition, Pakistan can significantly enhance its competitive standing in the global precious metals market. Streamlining the existing tax policies will not only improve the efficiency of exports but also formalize bullion trading, reduce the incidence of smuggling, and stimulate greater investment within Pakistan’s jewelry manufacturing sector.
