Export proceeds mechanism: SBP, gold exporters at odds

ISLAMABAD: The State Bank of Pakistan (SBP) and gold exporters have locked horns over the mechanism for realizing export proceeds, with SBP favouring retention of the existing 50 percent-50 percent arrangement and opposing proposals to allow 100 percent realisation in gold, well-informed sources told Business Recorder . The matter of gold and gems was discussed at a Commerce Ministry meeting, held in light of directions from the National Assembly Standing Committee on Commerce. Attendees included representatives from the Ministry of Industries and Production (MoI&P), Federal Board of Revenue (FBR), SBP, and private sector organizations such as the All Pakistan Small Jewellers and Tools Association (APSJTA), Golden Arts Manufacturers and Exporters of Artistic Gold Jewellery, and Salman Hanif, Chairman of the Gems and Jewellery Council. Arif Patel, representing Golden Arts Manufacturers, raised concerns over the current value addition mechanism linked to international gold prices under SRO 760(1)/2013. He noted that since the SRO’s issuance in 2013, gold prices have surged from approximately USD 1,380 per ounce to around USD 5,100, an increase of about 400%. Patel argued that linking value addition to fluctuating gold prices is misaligned with international practices and negatively impacts exports. READ ALSO: Gold jewellery export value-addition: NA panel asks MoC to talk to SBP to resolve issue He proposed that value addition be fixed on a per-gram basis rather than a percentage of gold value, suggesting USD 1.50 per gram for plain bangles and chains, USD 2 per gram for other plain jewellery, and USD 4 per gram for studded or embedded jewellery. Salman Hanif, Chairman of the Gems & Jewellery Council, endorsed the proposal. The SBP representative expressed no objection to value addition being determined either on a per-gram or percentage basis, clarifying that SBP has not issued a formal mandate for a percentage-based mechanism. Meanwhile, the MoIP representative favoured retaining the percentage-based system but suggested aligning the percentage with regional practices. Ultimately, stakeholders agreed that the value addition mechanism requires rationalization. The meeting also addressed inconsistencies in sales tax application on imports of precious metals under SRO 760(1)/2013. While such imports are intended to be exempt from customs duty, additional customs duty, and withholding tax, the Sales Tax Act currently exempts only gold imported under the Entrustment Scheme, leaving imports under the Self-Consignment Scheme and unsold jewellery subject to 18 percent sales tax. To resolve this, stakeholders proposed amending Serial No. 178 of Table-I of the Sixth Schedule to read “Import under SRO 760(1)/2013” or omitting reference to the Entrustment Scheme entirely. The proposal was unanimously supported and will be pursued with the Finance Division. Under the existing framework, a minimum of 50 percent of export proceeds must be realized in foreign exchange through banking channels, while the remaining 50 percent can be realized in foreign exchange or precious metals. Exporters highlighted that fluctuations in gold prices and USD exchange rates create disparities between domestic and international gold prices, causing financial losses. The private sector proposed abolishing the 50 percent-50 percent restriction to allow 100 percent realization in gold, while SBP maintained that the current arrangement should remain. SBP suggested that the proposal be formally submitted for review, after which a written response would be provided. Stakeholders agreed that a comprehensive policy is needed to streamline gold imports for the jewellery industry. The cap on gold imports under the scheme, set at 25 kg on a revolving basis, was also discussed. While the private sector initially sought its removal, citing no impact on foreign exchange reserves, deliberations revealed that the cap has never been reached. Consequently, the demand was withdrawn. After detailed discussions, the meeting took following decisions to rationalized value addition on per -gram basis ;(i) bangles and chains- from 8 percent to USD 1.50/gram ;(ii) plain jewellery: from 12 percent to USD 2/gram ; and (iii) studded/embedded jewellery: from 13 percent to USD 4/gram. It was also decided that sales tax exemption under Serial No. 178 will be aligned with SRO 760(1)/2013 whereas export proceeds realization will be formally deliberated with stakeholders to establish a workable framework. Copyright Business Recorder, 2026

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