The jewellery trade says the Narendra Modi government’s plans to trace gold deals is unworkable and won’t deter holders of black money, or hundreds of millions of Indians outside the tax net, from buying gold to keep their wealth away from the prying eyes of the authorities.
If the proposals fail, gold inflows will continue unabated in a country that accounts for nearly a fifth of global demand and stymie Modi’s effort to create a new asset class that could lure savers and back investments.
To track larger gold deals, this year’s budget declared that, from June 1, customers would have to disclose their tax code, or Permanent Account Number (PAN), for purchases above 100,000 Indian rupees ($1,580). But jewellers – many of whom voted for Modi – have protested, delaying the new rule.
“No jeweller will refuse to sell just because the customer doesn’t have a PAN card. He will find a way to ensure the customer leaves the store with jewellery,” said Bachhraj Bamalwa of the All India Gems and Jewellery Trade Federation.
A Reuters poll of a dozen jewellers and dealers found that black money generates nearly a quarter of annual gold demand that totalled some 900 tonnes that is worth nearly $34 billion at current prices.