In a major blow to the already struggling jewellery sector in India, the government might cut the threshold limit for the requirement of the permanent account number (PAN) or Unique Identity Code (Adhaar Number) in urban, and Kisan Credit Card number in rural areas for jewellery or bullion purchases between Rs 50,000-100,000, post Union Budget 2017. The Budget, which will be announced on Wednesday, is likely to further tighten the noose around black money after the demonetisation of Rs 500 and Rs 1000 notes, announced on November 8, 2016.
“The government has already proved that it would go all out against black money. Since jewellery trade has been on the government’s watch list, we may see a cut in the minimum threshold in know your customer (KYC) requirement to Rs 50,000-100,000,” said an industry veteran on condition of anonymity.
Rajesh Khosla, Managing Director, MMTC Pamp, the only LBMA (London Bullion Markets Association)-accredited bullion refinery in India, said in an interview on Tuesday that the government might come down hard on black money and the KYC threshold might be reduced to Rs 100,000 or even Rs 50,000 in Union Budget 2017.
Till three years ago, the minimum threshold on KYC requirement in jewellery trade stood at Rs 500,000 which was brought down to Rs 200,000 by the Bharatiya Janata Party (BJP)-led National Democratic Government (NDA) government in an attempt to curb black money from the system.
Further reduction, however, would hit the trade badly, said Kumar Jain, Director, Umedmal Tilokchand Zaveri, a bullion dealer and jewellery retailer in Zaveri Bazaar.
Post excise duty in the last year’s budget, jewellery trade was hampered badly with gold import in India slumping to 580 tonnes (an estimate by GFMS), the lowest in 13 years, from around 850 tonnes in 2015.
Many jewellers, however, do not anticipate such move by the government. They feel government’s demonetisation of high value bills in November is enough to act on black money. “Now, time has come to incentivise the trade,” said a senior industry official.
“The whole purpose of demonetisation was to neutralise black money from the system which, according to the government’s claim, was achieved. Presumably, there is no black money in the system. Still, if the government feels that black money continues to exist, then the whole purpose of demonetisation gets defeated. We have urged the government to raise the minimum threshold back to Rs 500,000,” said Ashok Minawala, Director, All India Gems and Jewellery Trade Federation (GJF), a premier trade body representing over 800,000 jewellers across the country.