ISLAMABAD, May 17, 2025 – The Government of Pakistan is actively reviewing proposals to reshape the tax regime for gold transactions in the upcoming federal budget for the fiscal year 2025-26.
The move comes in response to persistent volatility in gold prices, which has made the current tax structure both impractical and burdensome for exporters and local traders.
Sources within the Federal Board of Revenue (FBR), Ministry of Commerce, and Trade Development Authority of Pakistan (TDAP) have confirmed that detailed recommendations are being finalized. A major part of the reform centers around redefining the value addition norms for gold jewellery in absolute rupee terms rather than as a percentage of the transaction value. The proposal suggests setting fixed values at Rs. 100 per gram for gold bangles, Rs. 150 per gram for plain jewellery, and Rs. 200 per gram for studded or embedded pieces. This shift is expected to provide stability and transparency within the gold market.
The restructuring of the tax regime also aims to simplify the Entrustment Scheme procedures. Currently, exporters are required to have contracts notarized abroad and then re-attested by Pakistani Missions – a time-consuming and costly process. The new proposal recommends that contract verification could instead be completed via email, with original documents shown upon arrival, making the system more efficient.
To further incentivize exports, the government may allow exporters to bring in 100% of the gold value either in physical form or as foreign exchange. A key condition proposed is that withholding tax (WHT) and export development surcharge (EDS) be applied only on the value-added portion, excluding the gold content and wastage. This reform would make gold exports more financially viable, especially as profit margins in this industry are typically slim.
Another issue under review is the application of 18% GST on the import of gold, which significantly raises production costs and affects global competitiveness. Stakeholders are urging the government to amend SRO 760(I)/2013 to broaden the exemption to include both gold and unsold jewellery, thereby avoiding double taxation.
Finally, there is growing support to reinstate or revise specific entries in the Sales Tax Act to allow reduced rates of 1% for local gold purchases. This adjustment would correct the mismatch between the high tax rate on buying gold and the much lower 3% GST permitted on jewellery sales, aligning the tax regime more closely with industry realities and boosting business feasibility.