REFORM TIME FOR JEWELLERY BUSINESS

Demonitisation of high value currency notes a year ago has hastened positive changes in the gold trade, with several subsequent measures having helped to make the gold jewellery business more transparent.

Soon after announcement of withdrawal of high value currency notes on November 8 last year, those having a huge number of such notes, not shown on their books, rushed to buy gold jewellery. On that night, several jewellers were open till late, as the officially withdrawn currencies could be accepted till midnight.

However, this business continued. Income tax officials raided jewellers across the country on November 10, also using the closed-circuit TVs inside these shops to check how trade was done in old notes. Afterwards, some jewellers were sending their personnel to customers’ homes with notecounting machines. In all such cases, people paid an average 40 per cent premium for getting gold against their banned notes.

However, the occasion was also used by the government to hasten reforms in gold market, known to be a major channel for money laundering or storing of undisclosed income. Shaktikanta Das, then the Union Government's secretary, economic affairs, said: “Demonetisation aimed to eliminate unaccounted cash, whether held as cash or channelised into real estate, gold, etc. The other actions that followed demonitisation are logical — follow-ups of huge cash trails, digitisation, formalisation of the economy.”

Some major announcements were to get the jewellery trade on the regular books. Measures were taken to address the abuse of round tripping or inflating of export of jewellery. The push for digital transactions was a prime move. Implementation of the goods and services tax, bringing gold jewellery under the provisions of the Prevention of Money laundering Act and notifying of compulsory hallmarking for jewellery are other measures.

The PMLA provision has been withdrawn for the time being, due to lack of clarity on the threshold amount above which sellers have to collect customer details. Hallmarking will be implemented after rules are announced; the Union minister of consumer affairs say the plan is to mandate it by by January 2018.

The measures have not hampered gold demand. In the 12 months since demonetisation, gold import is estimated over 800 tonnes . If duty-free import from South Korea is considered, it is estimated 840 tonnes, compared to 590 tonnes from November 2015 to October 2016.