With soaring taxes choking legal imports and fueling smuggling, Sri Lanka is now weighing a bold move to refine gold at home and reclaim control of its troubled gold trade.
Sri Lanka is seriously considering the establishment of a domestic gold refinery as a response to ongoing gold shortages, rising prices, and the rapid expansion of illegal gold trading driven by excessive import taxes. Authorities believe a local refinery could help stabilise the market, support jewellers, and reduce pressure on foreign exchange reserves.
The National Gem and Jewellery Authority plans to develop a refinery that would import raw or semi-refined gold, process it locally, and supply refined gold to local jewellers and the Central Bank. Any surplus gold would be re-exported, allowing Sri Lanka to add value domestically while strengthening oversight of the gold trade.
High import taxes, currently exceeding 45 per cent under the International Monetary Fund programme, have almost completely halted formal gold imports. As a result, much of the gold trade has shifted into the informal sector, creating a thriving black market and undermining legitimate businesses. Policymakers view a domestic refinery as a practical solution to formalise the industry and restore transparency.
S.P. Chaminda, Chairman of the National Gem and Jewellery Authority, told a media briefing in Colombo that the authority is actively pushing forward the refinery proposal alongside broader tax reforms, including a single tax structure for gems. “The refinery will make gold more accessible and reduce illicit trade that drains foreign exchange and harms the legitimate industry,” Chaminda said. He added that Sri Lanka could import less-refined gold from producing countries such as South Africa.
At present, high import duties, including 18 per cent VAT and additional levies, have made legal gold imports economically unviable. These taxes have pushed prices higher, reduced consumer access, and placed severe strain on the local jewellery sector, threatening long-established businesses and employment.
A senior Finance Ministry official confirmed that the government is open to industry proposals for tax simplification. Options under consideration include a single tax system for gems and a limited tax-free import quota. The official noted that lower duties applied to larger legal import volumes could generate more revenue than the current high-tax regime applied to minimal formal imports, according to the Sunday Times Business.
Experts caution that setting up a gold refinery would require heavy capital investment, advanced technical expertise, reliable electricity supply, and steady access to raw gold. Industry estimates suggest that a robust industrial refinery could cost between US$30 million and US$50 million or more, posing challenges in Sri Lanka’s current fiscal climate.
