SCCI seeks tax exemption for gemstone industry

The Sarhad Chamber of Commerce and Industry (SCCI) has called for exempting the gems and jewellery sector from all kind of taxes for a period of at least five years to help promote the potential sector of the North West Frontier Province (NWFP).
The demand has been made in the proposals of the trade body for inclusion in the National Trade Policy 2009-10 scheduled to be announced with the commencement of the new financial year in Pakistan. For the development and promotion of the sector, the SCCI has demanded incentives for exploration, mining, cutting and polishing of gemstones for export on scientific lines to be rationalised at par with the neighbouring gems producing countries.
It proposed abolition of sales and advance income tax on the semi-precious stone of Lapis Lazuli, as was practised earlier so that the export of cut and uncut stones could be promoted. Lapis Lazuli was earlier imported from Afghanistan via Shah Saleem Border Chitral on nominal Octroi charges in district Chitral.
But, due to war on terror and recent arm clashes in the border area, export through Pak-Afghan Shah Saleem border has totally been stopped. The semi-precious stone is now being imported through Torkham border and no income tax or import duties is levied. However, 17percent sales tax and 5percent advance income tax is levied on this stone, which comes to a total of 22percent.
The government of Afghanistan is exporting this stone through transit trade and the local traders cannot compete with them. Therefore, the local traders demand 5percent incentive to increase the local export of the precious and semi-precious stones.
The SCCI proposal also said that the gems and jewellery sector requires long term planning to earn foreign exchange. For this purpose, the government should allow duty free import of gem cutting, polishing and carving machinery to boost the process of value addition.
Furthermore, all lapidaries should be treated at par with units, anywhere in the country and the unavailable gemstone should be allowed to enter the country under entrustment scheme as advance.
The proposal said that Peshawar has become the hub of the gemstones in recent times and the government should facilitate the sector by enhancing the export refinance facility from 50percent to 80percent. The facility will raise the gemstone export considerably and the foreign exchange reserves will also develop. The gem and jewellery should be announced a zero-rated industry, as it is export-based industry.
Furthermore, the SCCI in its proposals for the trade policy recommended to exempt the import of polished and unpolished, cut and uncut and rough and semi-precious gems and diamonds from levy of 15percent sales tax and 6percent income tax. The proposal reasoned that since these goods are very expensive and precious having been taxed so heavily attracts malpractices and smuggling.
The neighbouring country India earned large value by cutting, polishing or by setting in jewellery for export worth billion of dollars only last year. It also stressed launching of an overseas publicity campaign of gemstones through both local and foreign media. Trade Missions should be directed to make special arrangements in this regard.
The SCCI also proposed establishment of a Dazzle Park with modern machinery for cutting and polishing of the precious and semi-precious stones in Peshawar. During the past few years the business of the precious stones has grown to a great extent and some big markets have been emerged in the city. Presently, these stones were explored locally or imported from Afghanistan and them exported to Europe, Middle East and Far Eastern countries.
Value addition in these products is very little due to non-availability of latest machinery for polishing. As a result, these stones are exported with little value addition, making India, Sri Lanka and Thailand the main beneficiaries for having modern mining machinery and polishing. Due to security reasons, the interest of the foreign investors in Pakistan's market is nominal, the SCCI proposal observed.