Sri Lanka’s vibrant gem and jewellery sector is set to sparkle once again, following a significant move by the Inland Revenue Department (IRD) to resume Value Added Tax (VAT) refunding for tourists. Effective from July 4, 2025, tourists departing from Bandaranaike International Airport (BIA) can now reclaim the VAT paid on gems and jewellery purchased in Sri Lanka.
Why the VAT refund matters
The new measure is expected to revive interest among foreign buyers who had turned away due to higher prices caused by the 18% VAT imposed on gems since last year. According to the Chairman & CEO of the Gem & Jewellery Authority, Mr. Naveen Sooriyarachchi, this VAT burden led to a sharp 25% decline in exports, falling from USD 477 million in 2023 to USD 360 million in 2024.
Sri Lanka’s local gem production remains robust, but only about 24% of estimated output was exported last year, underlining the untapped potential. The absence of VAT refunds made Sri Lankan gems less competitive, especially against other destinations that either have no VAT or offer efficient refund mechanisms.
Who qualifies for the refund?
Foreign visitors may now reclaim VAT on eligible purchases, provided they:
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Hold a valid visitor visa (non-dual citizens).
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Have minimum qualifying purchases of LKR 59,000.
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Carry the goods out of the country.
This move aligns Sri Lanka more closely with global practices, incentivising tourists to buy locally and carry these purchases abroad—an indirect form of export that supports the local industry.
The broader business impact
At R&R Partners, we see this as more than just a boost for gem traders. It’s a positive signal for the tourism, retail, and luxury sectors, encouraging higher spending by visitors and potentially increasing foreign currency inflows.
However, businesses involved in these sectors should take note of:
Proper VAT invoicing and documentation to facilitate tourist claims.
Accurate reporting of indirect exports and foreign currency receipts.
Internal compliance reviews to ensure alignment with IRD refund regulations.
How we can help
Our team at R&R Partners Sri Lanka is ready to assist businesses in the gem & jewellery sector—and beyond—with:
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VAT compliance reviews and advisory services.
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Guidance on structuring sales to maximise eligibility for tourist refunds.
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Preparation for potential tax audits or IRD inquiries tied to indirect exports.
If you’d like to discuss how these changes might affect your business or explore proactive tax planning strategies, feel free to reach out to us.
