Jewellery sales halve in four weeks on PMLA extension

Jewellery sales have declined by around 50 per cent over the past four weeks, due to consumers’ deferring of orders amid fear of future action against them under the Prevention of Money Laundering Act (PMLA).

The government recently extended PMLA to the jewellery sector. This restricts cash transactions beyond ~50,000 without a Know Your Customer (KYC) declaration. This regulation, however, contradicts the income tax rule which permits cash transactions up to ~2,00,000 without a KYC requirement.

A delegation comprising bullion dealers and jewellers across the country is scheduled to meet commerce ministry officials on Friday to apprise them of the massive impact on their industry. In past years, jewellers had 30-40 per cent of annual sales during the ongoing festive season, beginning from Raksha Bandhan to the new year.

“Sales have declined by 50-60 per cent in the past few weeks,” said Surendra Mehta, secretary, India Bullion and Jewellers Association.

In a representation to the ministry of commerce, the body has sought a 10-fold increase in the cash limit for KYC requirement, to ~5,00,000. It argues the price of gold was ~500/g when PMLA was enacted in 2002. So, consumers could have purchased 100g with the ~50,000 cash purchase limit. The price is now ~3,000/gm, six times more.

“The PMLA regulation is good for the long term; we are not averse to it. But, we want the government to raise the cash purchase limit to at least ~2,00,000 for KYC. Most of our customers are women who save money from the lumpsum amount given by husbands. They normally accumulate their savings over a few months to buy jewellery, after achieving a threshold of ~50,000 or ~1,00,000. Calling for KYC from such customers would be unfair — they do not want to disclose such details. Their money so saved is not black and nor is their intention to use jewellery for any illegal purpose. Women consumers’ objective is to use this jewellery in need,” said Kumar Jain, director, Umedmal Tilokichand Zaveri, a bullion dealer and jewellery retailer at Zaveri Bazaar here.

Kumar adds that many consumers never return after finalising the purchase when asked for a PAN (income tax) or Aadhaar number.