The Centre's decision to ease Know Your Client (KYC) norms for gold purchase has infused fresh life into a segment that was at the scare of plummeting to a 10-year low during the gold buying diwali season. Jewellers said they hope customers make a return at their counters.
However, a few concerns about gold purchase are still on their minds. "Though rules about KYC norms have been relaxed, gold purchase will still be subject to IGST. Gold is a commodity that is moved many times. E-way bill and IGST processes are impractical for such small amounts for any trader," said Kumar Jain, president of Bullion Merchants Association.
As per GST norms, any gold purchase above Rs 50,000 by jewellery makers are subject to an Inter-state GST, which in turn increases compliance burden on small jewellers and trade craftsmen. Gold purchases would also be subject to a mandatory three per cent GST rate. This, apart from gold craftsmanship (jewellery-making charges) being subject to a GST rate of five per cent, effective from October.
Earlier, gold making charges were subjected to 12 per cent duties under the GST. The recent reliefs offered by the government from its earlier stranglehold, are aimed at not just gold traders and jewellers but also the common gold buyer.
A government notification on Friday evening rescinded an August 23 notification that designated dealers in precious metals, precious stones and other high-value goods, as businesses mandated to report under the Prevention of Money Laundering Act, 2002. The new notification takes away the previous norms that required consumers to tender permanent account number (PAN) card and Aadhaar card for purchasing jewellery above Rs 50,000, a move aimed to stem black money.
The KYC norms had put pressure on jewellers and bullion traders as businesses suffered due to subdued demand.
Admitting the government's mistake and clarifying the government's withdrawal, Union revenue secretary Hasmukh Adhia said, "Earlier we thought we could have jewellers as reporting high-value purchase like banks and investment firms are already mandated to do. But it was spreading some misunderstandings on gold-buying, instead."
He, however, maintained that the government is in no mood to step back from its fight against black money. "We want high-value purchases to be reported. We will hold wider stakeholder consultation and take a decision in due course," added Adhia.
The dip in gold demand threatened bullion dealers who had stocked up on cheaper gold imports from south-east Asia, for catering to the festive demand. In August, Indian bullion dealers imported around 60 tonnes of gold, compared to 22.7 tonnes in the same month last year. Most of these dealers were taking advantage of a loophole that allowed duty-free gold imports from South Korea.
