Sri Lanka is actively considering the establishment of a domestic gold refinery to address persistent shortages and high import taxes, which have pushed much of the gold trade into the informal sector.
The National Gem and Jewellery Authority (NGJA) plans to set up a facility that will import raw or semi-refined gold, process it locally, and supply both local jewellers and the Central Bank, while re-exporting any surplus.
High import taxes, exceeding 45 per cent under the International Monetary Fund (IMF) programme, have effectively halted formal gold imports, fueling a thriving black market. A local refinery is seen as a key solution to formalise the gold trade.
S.P. Chaminda, Chairman of the NGJA, told a recent media conference in Colombo that the authority is actively pushing for the refinery, alongside broader tax reforms such as a single tax on gems, to enhance value addition.
“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 the facility is expected to import less-refined gold from producing countries such as South Africa.
Currently, high import duties and taxes—including 18 per cent VAT and other levies—make legal gold imports challenging and encourage smuggling. Chaminda highlighted that these taxes also push up prices, making gold less affordable for consumers, constraining the local jewellery market, and threatening businesses.
A senior official from the Finance Ministry noted that the government is receptive to industry proposals for tax simplification, including the implementation of a single tax system for gems and the possibility of a tax-free import quota. The official added that lower duties on larger import volumes could generate more revenue than the current high taxes applied to limited legal imports, as reported to the Sunday Times Business.
Experts caution that establishing a gold refinery in Sri Lanka would require substantial capital investment, technical expertise, and reliable power and raw material supply, all of which are costly in the current fiscal environment. Estimates suggest that robust industrial refinery projects could cost between US$30 million and US$50 million or more.
