Surge in Sea Street due to Hindu festival gold rush
Despite a tax hike on gold, hundreds of customers countrywide especially women, made a beeline on Wednesday to gold and jewellery shops in Sea Street, Pettah to buy glittering gold jewellery to celebrate the Akshaya Tritiya Hindu festival, an auspicious day for buying gold and other valuable items.
Crowds at a Sea Street jewellery store on Wednesday.
Jewellery merchants, who had announced a slew of discounts and attractive offers mainly through TV advertisements for the past two to three weeks, reaped maximum benefit drawing a large number of customers with cash registers ringing merrily, several customers told the Business Times during a visit to the area.
With the belief that buying gold on Akshaya Tritiya augurs well and brings fortune throughout the year, jewellers offered discounts, gold coins, and gifts as well as a free, one night stays in a hotel for honeymoon couples to entice clientele.
The imposition of a 15 per cent tax on gold imports by the Treasury with effect from midnight Tuesday didn’t deter customers or sales, several jewellers said.
Some of the leading jewelers who advertised heavily over local TV channels had given an opportunity to their customers to reserve their desired piece of jewellery from its collection (by paying an advance of 25 per cent) between March 12 and April 17 and have the items collected on the day of ‘Akshaya Tritiya’, April 18.
These advertising and marketing campaigns have resulted in over 100 per cent increase in footfalls on Wednesday, a leading jewellery merchant told the Business Times adding that most of the jewellery shops were kept open till late night on Akshaya Tritiya day.
“The response has been in line with more than our expectations this time,” another leading jeweller said.
“The demand is quite good this year and the sales are likely to surpass last year’s figures,” a small jewellery shop owner said.
The number of customers to one of the leading jewellery shops in Sea Street exceeded 5,000 and many of them thronged there from early morning around 6 a.m, witnesses revealed.
The Finance Ministry has imposed a 15 per cent tax on gold with the aim of limiting imports which has affected the trade deficit and the exchange rate, a senior Treasury official disclosed adding that the a large number of people had been able to buy gold items at old prices on this special day.
“A large quantity of gold imported to Sri Lanka duty free is smuggled out to neighbouring countries especially to India with high customs duties,” he pointed out adding that this move will put an end to that practice as well as re-exporting of gold.
Excessive gold bullion imports posed a risk to the Sri Lankan banking industry as gold is frequently used as collateral against banking loans and that a drop in the gold price has led to the increase in the number of loan defaulters, he claimed.
However the gold tax hike will affect Sri Lankan jewellers and other citizens who wished to purchase gold as the price of a gold sovereign will go up by Rs. 8,000, analysts said.
Addressing a recent media conference in Colombo, Parliamentarian Bandula Gunawardana noted that gold smuggling will increase to avoid the 15 per cent tax.
He noted that the government’s move would definitely decrease the demand greatly affecting the local gem and jewellery industry.
The former Rajapaksa regime imposed a 10 per cent tax on gold imports in 2013 while the present Government not only eliminated the 100 per cent tariff on gold, but also took the additional step of reducing the previous 10 per cent tax to 7.5 per cent on the directions of former Finance Minister Ravi Karunanayake.
The removal of gold buying restrictions was working well at that time and the end result for gold investors was an increase in demand for the yellow metal, analysts said.