In May 2025, the Government of Pakistan did something remarkable: it banned the import and export of precious metals and gemstones for sixty days, citing gold smuggling and pressure on foreign exchange reserves.

The logic, on the surface, is understandable. Pakistan loses billions annually to undocumented gold flows. The hawala networks are real. The grey-market bullion dealers are real. The FX drain is real.

What is also real, and what never makes the press release, is who actually suffers when you impose a blanket trade ban. It is not the smuggler. The smuggler has no import license to suspend, no letter of credit to freeze, no DNFBP registration to threaten. He continues operating as he always has. The only people a formal ban stops are the formal businesses: the registered jewelers, the documented exporters, the manufacturers who purchase gold through banking channels and file their returns.

By October 2025, the Economic Coordination Committee and Cabinet had approved restoration. On 21 November 2025, the Commerce Ministry issued SRO 2198, formally restoring gold trade under a renamed framework, the Import and Export of Precious Metals and Jewelry Order 2013. The 120 day entrustment period was restored. Digital passbooks were formally recognized. All future transactions were required to route through the same bank as the corresponding import. Apostilled foreign buyer contracts were accepted for the first time.

Six months. A formal sector in crisis. Smugglers unaffected.

At Orah Jewels and Stones & Beads Manufacturing Company, we work primarily in semi-precious gemstones, not gold jewelry. SRO 760 itself governs only precious metals and gold jewelry, gemstones were removed from its scope in 2014 and operate under separate export regulations. But the May 2025 ban was not limited to gold: the executive notification suspended the import and export of both precious metals and gemstones together. The two sectors share the same SBP foreign exchange framework, the same DNFBP registration requirements, and the same courier and banking barriers. When the government chooses to restrict trade, formal businesses in both sectors feel it equally.

This is Part II of our series on the perils of doing business in Pakistan. Part I established the foundational paradox: a 3% sales tax on jewelry with zero input tax adjustment means every rupee a registered business spends in formal procurement earns it nothing in tax credit, while its unregistered competitor prices freely below it. This post extends that argument into gold import, export, and capital gains, three more layers where the same paradox repeats.

Pakistan’s gold tax framework is not, on paper, unreasonable. In practice, it is a compound burden that lands almost entirely on documented participants.

At the import stage: A 1% advance tax applies on the import value of gold. This is adjustable against final tax liability — meaning it is, in theory, a prepayment rather than a cost. In practice, for a business with thin margins and no mechanism to quickly reclaim input credits, it is working capital locked away.

At the sale stage: Two taxes operate simultaneously. First, the 3% sales tax on jewelry articles, as established in Part I, carrying the same punishing condition: no input tax adjustment is permitted. A manufacturer who buys gold at documented market price, pays every vendor through a banking channel, and issues a proper invoice still cannot offset a single rupee of input GST against that 3% liability. It is a flat tax on gross revenue, full stop. Second, a 1% withholding tax applies on gold and silver sales, adjustable, a small mercy, but layered on top of the 3% with no input relief.

At the capital gains stage: The Income Tax Ordinance treats gains on gold as ordinary income, folded into total income and taxed at progressive slabs. For the 2025–26 tax year: zero up to PKR 600,000; 15% on 600,001 to 1.2 million; 20% on 1.2 to 1.6 million; 30% on 1.6 to 3.2 million; 40% on 3.2 to 5.6 million; 45% above 5.6 million. For any trader in meaningful volumes, the theoretical liability is significant.

There is also a harder edge in the Customs Act. If you are found holding gold bullion and cannot prove its documented origin, the burden of proof sits with you, not the state. You must demonstrate the gold was not smuggled. This inversion of the standard legal burden, guilty until documented, is not an abstract technicality. It is a daily operational reality for anyone moving gold through formal channels.

The confusion in the market about the gold tax rate, or how much tax on gold in Pakistan, is not mere public ignorance. It is a practitioner problem. The 3% figure applies to documented jewellery sales in the formal economy. But in an FBR audit context, undocumented transactions can attract assessments at far higher effective rates, approaching 25% when penalties, surcharges, and deemed income provisions are applied together. The 3% and the 25% are both real numbers; they apply to different scenarios. A registered business operates at 3%. An informal operator faces no assessment at all.

If the import and domestic sale framework is punishing, the export framework is commercially catastrophic.

The value addition norm under SRO 760 requires Pakistani gold jewelry exporters to demonstrate minimum making charges over the international gold price: 8% for plain bangles and chains; 12% for other plain jewelry; 13% for studded or embedded pieces.

At April 2026 gold prices, 13% of the international gold price translates to approximately $17 per gram in required making charges.

The international market pays $4 to $5 per gram for making charges on Pakistani jewelry.

You cannot export gold jewelry from Pakistan on documented terms, through a banking channel, at declared value, and remain commercially viable. The rule mathematically excludes you from your own export market.

This is why Pakistan’s gold and jewelry exports sit at $30–40 million annually. India’s comparable exports are $32 billion. The gap is not explained by craftsmanship, design, or raw material access. The gap is explained by a regulatory framework that makes formal export commercially impossible.

In February 2026, the National Assembly Standing Committee on Commerce directed the Ministry of Commerce to resolve this impasse with the State Bank of Pakistan. The industry’s proposal, already formally tabled, is a per-gram model: $1.50 per gram for plain bangles; $2.00 for other plain jewelry; $4.00 for studded and embedded pieces.

As of March 2026, the standoff continues. Gold exporters want export proceeds settled in gold rather than foreign currency; the SBP is opposed. Together, they represent another season of Pakistan’s jewelry sector sitting on the sidelines of a global market that will continue without it.

The CGT structure on gold, theoretically up to 45% at the highest income slab, exists in legislation. It does not exist in practice. Near-zero enforcement is not a matter of policy leniency; it is a matter of infrastructure absence.

To assess capital gains tax on gold, you need to know when it was purchased, at what price, and when it was sold, at what price. You need a documentation trail. Pakistan has no mechanism to capture that trail at scale. There is no gold transaction registry. There is no requirement for bullion dealers to issue standardized receipts that feed into any central reporting system.

The result is a tax that exists on paper and falls, in practice, only on the person honest enough to document their gold transactions. If you buy gold from a registered jeweler, receive an invoice, and later sell at a gain, you are theoretically liable for CGT. If you buy from an informal dealer and sell to the same, you have no CGT exposure because there is no paper trail for the FBR to follow.

This is identical in structure to the paradox documented in Part I. The 3% sales tax falls on the registered seller, not the unregistered one. The CGT falls on the documented buyer, not the undocumented one. Documentation, the basic building block of any functional economy, is the mechanism by which you become a tax target.

It is worth pausing to name what we have described across these four sections, because the pattern is not coincidental.

At every layer of Pakistan’s gold framework, import, domestic sale, export, capital gains, the regulatory burden lands disproportionately on the documented, formal participant. The import ban shut down registered exporters while smugglers continued uninterrupted. The 3% sales tax with no input adjustment raises costs for registered jewelers but not their informal competitors. The export value addition norm makes formal gold jewellery exports commercially non-viable while undocumented gold flows face no such ceiling. The CGT is theoretically enforced against documented buyers and ignored everywhere else.

The same businesses that pay the 3% sales tax, register with DNFBP, file income tax returns, and source gold through legal channels are the ones who feel every policy overcorrection, the six-month ban, the export norm that prices them out, the CGT that only bites if you keep books. Their informal competitors feel none of it.

First, adopt the per-gram value addition model immediately. The industry proposal, $1.50/gram for bangles, $2.00 for plain jewelry, $4.00 for studded pieces, is already before the NA Standing Committee. Maintaining the percentage-of-gold-price model at 8–13% is not a policy choice; it is a decision to have no formal gold jewelry exports.

Second, end blanket trade bans as a smuggling response. The May 2025 sixty-day ban punished registered exporters while smugglers continued uninterrupted. The government has legal tools, Customs Act penalties, port surveillance, DNFBP enforcement, to address gold smuggling without suspending the documented sector.

Third, build CGT reporting infrastructure before levying CGT. Either build the documentation system, standardized bullion receipts, a transaction registry, or suspend CGT on gold until that infrastructure exists. A tax that only falls on the compliant is not a tax; it is a fine on transparency.

Fourth, establish an authorized precious metals sourcing window. A Gold Bank, or an SBP authorized precious metals window through scheduled banks, would give manufacturers a legal sourcing path at market rates. Without it, the choice between formal and informal sourcing is an economic one, not an ethical one.

Fifth, align gold and gemstone export reforms under a single policy vision. The National Gemstone Policy 2026–2030 — with its National Warranty Office, gem registry, and revised export procedures, is precisely the kind of documentation and enforcement infrastructure that gold jewelry exports also need. Pakistan’s competitive advantage in handcrafted jewelry sits at the intersection of gemstones and precious metals. Reforming them in separate silos will continue producing separate failures.

Can I bring gold from Dubai (UAE) to Pakistan?

Yes, but with conditions. Passengers may bring gold into Pakistan, but it must be declared at customs through the Red Channel if it exceeds personally worn jewelry. Undeclared gold of up to 15 tola (approximately 175 grams) risks confiscation plus a fine equal to its full market value. Above 500 tola (approximately 5.8 kg), penalties escalate to confiscation, a fine of up to ten times the value, and a minimum three-year prison sentence. Declaration is not optional; it is a legal requirement under the Customs Act, 1969. You are still advised to get in touch with the customs at the arriving airport for approval. Laws can be interpreted depending on the mood of the inspector.

How much gold can I bring from Dubai (UAE) to Pakistan duty-free?

Pakistan does not publish a fixed duty-free bullion allowance the way some countries do. Personally worn jewelry is generally treated as personal effects. Gold bars, coins, or quantities that appear commercial are subject to customs duties and a 1% advance tax on import value. The critical gap: there is no clearly defined legal threshold between “personal jewelry” and “commercial import”, this distinction is left to customs officer discretion at the point of entry, which creates significant uncertainty for travelers. Always declare fully and carry proof of purchase.

What happens if I don’t declare gold at the airport?

Non-declaration is treated as smuggling under the Customs Act. Consequences range from confiscation plus a fine equal to the gold’s value (for smaller quantities) up to ten times the value plus criminal prosecution for larger amounts. Customs officers are authorized to scan baggage, and the burden of proof falls on the passenger — not the state — to show the gold was not being smuggled. “I did not know I had to declare it” is not a legal defense.

Can I sell gold brought from Dubai inside Pakistan?

Legally, yes, if you declared it on arrival and paid any applicable duties. Selling through a registered jeweler would then trigger the 3% sales tax and applicable withholding tax. In practice, most such gold changes hands in the informal market, where no taxes are assessed and no receipts are issued. That informality is not a solution, it is a symptom of the same structural failure this article describes.

How much tax do I pay when buying gold jewelry in Pakistan?

If you buy from a registered jeweler, a 3% sales tax applies under the special procedure for jewelers (SRO 391). This is assessed on the making charges, the value-addition component (labor, craftsmanship, design), not on the commodity value of the gold itself. It is not subject to input tax adjustment, meaning the 3% on making charges is a straight cost to the business, passed on to the buyer.

Is gold subject to capital gains tax in Pakistan?

Yes, under the Income Tax Ordinance, gains on the sale of gold are treated as ordinary income and taxed at the applicable slab rate up to 45% at the highest bracket for 2025–26. In practice, enforcement is near zero: Pakistan has no gold transaction registry and no mechanism to track purchases and sales at scale. The CGT liability falls almost exclusively on buyers and sellers who keep formal records — the same paradox that runs through every section of this article.

Can I export gold jewelry from Pakistan?

Formally, yes, under SRO 760, restored in November 2025. Practically, the value addition norms make it nearly impossible to do so at a profit. Exporters must show making charges of 8–13% of the international gold price, which at current rates translates to $10–$17 per gram against a market rate of $4–5 per gram. The NA Standing Committee on Commerce is reviewing this, but no amendment has been passed as of April 2026.

Can gold be imported commercially into Pakistan?

Not freely. Commercial gold import has been effectively banned since 2013. The only legal route is the entrustment scheme under SRO 760, which permits gold to be imported by foreign buyers and entrusted to Pakistani manufacturers for jewelry production and re-export. It is not a route for domestic sale. This absence of a commercial import channel is one reason formal jewelry manufacturers cannot source raw material through documented channels, a structural gap that has not been addressed in over a decade.