By Musnad Sufian –

Musnad Sufian

Sri Lanka has long been a shining beacon in the global gem and jewellery trade. Our island’s rich heritage, skilled craftsmanship, and unmatched gem quality have drawn thousands of international buyers, collectors, and investors. For decades, the absence of sales tax on gem exports to foreign customers has helped sustain this delicate trade.

However, the news that Value Added Tax (VAT) may soon be levied on gem sales to foreign buyers — even with the promise of a refund at the airport — poses a serious threat to this vital export industry.

Why This Move Could Be Counterproductive?

A gem or a piece of jewellery is not a basic necessity — it is a luxury, often bought after much thought and comparison. This makes pricing and convenience critical factors in the final decision.

Under the new rule:

A foreign buyer purchasing gems worth $10,000 will have to pay an additional $1,800 upfront as VAT ( 18.%).

Even if the buyer is entitled to a refund at the airport, blocking such a huge amount of travelling budget, the requirement to stand in line at the airport , complete paperwork, and wait for a reimbursement is an obvious deterrent.

Worse, in cases of smaller purchases (e.g., $200), the idea of queuing for a mere $36 refund feels impractical and unattractive.

Many travelers rush to the airport last-minute, and often cannot complete the refund process. This results in a poor customer experience and reduces the chance of return visits or referrals.

Already, many in the gem sector are seeing a noticeable decline in sales, and fear that this tax, despite its good intentions, will further erode buyer confidence.

A Better, More Practical Solution

We understand the government’s need to streamline tax policies. However, we urge a more practical and buyer-friendly system that balances compliance with convenience.

One possible solution is:

Allowing passport-based, VAT-exempt sales for foreign buyers at the point of sale.

The seller can record the buyer’s passport number, flight details, and nationality on the tax invoice, with the option of submitting it electronically to the Inland Revenue Department.

This allows transparent tracking without burdening the buyer or risking tax evasion.

Even if the government assures a refund mechanism with dedicated, efficient VAT refund counters at the airport, separate from other queues, the impact on sales would still be negative.

That’s because it is difficult — and often unreasonable — to expect a foreign customer to pay an extra 18% upfront and then seek reimbursement for a system that is not his concern.

In the buyer’s eyes, he has done nothing wrong to deserve the hassle. This added layer becomes a psychological and practical barrier to finalizing the sale.

Don’t Risk a Golden Opportunity. Do not kill the hen that lays golden eggs

Sri Lanka’s gem industry is more than a business — it is part of our identity. Tourists don’t come here to shop like in Dubai or Singapore; they come for authentic, heritage-rich treasures. If we make it hard for them to buy, they will simply buy elsewhere — and we all lose.

We, as responsible citizens and entrepreneurs, voted for this government and support its efforts to build a stable economy. But we also believe that policy must be rooted in ground realities, especially in a niche sector like gem trade.

We request the relevant authorities to re-evaluate this VAT mechanism and work with stakeholders to find a balanced, business-friendly approach that keeps Sri Lanka globally competitive, without undermining revenue.

Let’s protect the sparkle of our gem industry — before it fades.