Indian Gov't May Deal Jewelers Another Blow by Lowering KYC Limit

World News
02/02/2017 09:17

In a major blow to the already struggling jewelry 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 jewelry or bullion purchases between Rs 50,000-100,000 ($740-1,480), writes Business Standard. The Budget, announced Wednesday, is likely to further tighten the noose around black money after the demonetization of Rs 500 and Rs 1000 notes on November 8, 2016. "The government has already proved that it would go all out against black money", said an industry veteran on condition of anonymity, and suggested the know your customer threshold could fall. Meanwhile, jewelers say there is no longer black money in system post demonetization and that such a move will only dampen demand.

Three years ago, the minimum threshold on KYC requirement in the jewelry trade stood at Rs 500,000 ($7,410); it was lowered to Rs 200,000 ($2,965) 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 jewelry retailer in Zaveri Bazaar. Business Standard also notes that many jewelers do not anticipate such move by the government. They feel government's demonetization 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. In the budget itself, 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. In the budget, Finance Minister Arun Jaitley slashed income tax rate for the lower rung of taxpayers, those earning between Rs2.5 lakh and Rs5 lakh. The other big tax cut was for small enterprises with turnover not exceeding Rs50 crore - a significant move considering that small and medium enterprises form 96% of India’s companies. It also moved to curb black money and bring transparency to political funding.