Business owners in Nepal’s jewelry industry have voiced mixed reactions to the government’s newly introduced tax policy, unveiled in the budget for the fiscal year 2025/26.

While the government has imposed a 2% luxury tax on all jewelry and a 13% value-added tax (VAT) on diamond and precious stone-embedded ornaments, traders have raised strong objections, warning of negative market impacts. However, some budget provisions—such as the expansion of bonded warehouse facilities and a more flexible import allowance for returning migrant workers—have been welcomed by the industry.

In a joint press statement issued on Sunday, June 1, industry leaders—including Ravindra Shakya, President of the Federation of Handicraft Associations of Nepal; Kishan Sunar, President of the Nepal Gold, Silver, Gem and Jewelry Association; and Diyesh Ratna Shakya, President of the Federation of Nepal Gold and Silver Dealers’ Association—expressed their views on the policy.

“The provision allowing Nepali migrant workers to bring in a reasonable quantity of gold jewelry as personal belongings is a positive step,” the statement noted. “Likewise, the government’s commitment to support export-oriented industries by offering bonded warehouse facilities and allowing access to gold and silver on 50% advance payment is encouraging.”

Despite these positives, business leaders strongly object to the blanket imposition of the luxury tax and VAT. They noted that while a 10% luxury tax was introduced last year on jewelry valued above Rs 1 million, the new policy removes that threshold, applying the tax to all jewelry regardless of value.

Industry representatives argue that the revised tax policy will impose a direct financial burden of 2% to 13% on consumers. This, they say, will not only fuel inflation but also create a significant price gap compared to neighboring India, increasing the risk of smuggling and illegal trade.

They further stressed that the jewelry sector operates under a mandatory buyback guarantee system, which requires the resale and purchase prices to remain closely aligned. Excessive taxation, they warned, could disrupt this balance and damage consumer confidence.

The associations have called for the immediate repeal of the new tax provisions and urged the government to engage in meaningful consultation with industry stakeholders. They have also demanded the formulation of clear, long-term policies to foster growth in the gold and silver industry.

Before implementing changes to the tax structure, the business groups called for a comprehensive study of the long-term impacts on investment, employment, and the overall market. They cautioned against expanding the tax net without a full understanding of the consequences.

Additionally, citing a directive from Nepal Rastra Bank, the statement pointed out that banks are currently unable to supply 100-gram and 200-gram quantities of gold—critical for small-scale producers. This shortage, they said, is obstructing the export of smaller jewelry consignments. The industry has also called for the removal of the 2.5% Tax Deducted at Source (TDS) currently levied on jewelry exports.