Cash deals in bullion may be capped at Rs 50,000

Retail jewellers may be exempted as customers are allowed to buy jewellery up to Rs 200,000 in cash

Bullion traders may soon have to conduct all transactions above Rs 50,000 through banks, with the government considering a proposal to limit cash deals to bring transparency in the trade.

Retail jewellers, however, are likely to be exempted from the proposed move, as customers are still allowed to buy jewellery up to Rs 2,00,000 in cash without providing the permanent account number (PAN), sources close to the development said.

A large number of jewellers were under the scanner of the income tax (I-T) department over the spike in sales just after demonetisation was announced on November 8.

Many jewellers allegedly sold gold to customers at a huge premium by accepting the demonetised high-value currency.

The I-T probe later found that many deals were made where bills were prepared in a different name and delivery went to another party.

Such third-party deals led to another proposal suggesting that gold by an importer or a secondary seller has been against formal delivery order.

This will ensure the dealer has received an order and gold is sold to the same buyer by accepting money through a banking channel.

In future, when the government allows gold spot exchange, compliance by bullion dealers about dealing above board will be very helpful, the sources mentioned above said.

The issue of smuggling is almost settled, with only an insignificant quantity of gold entering India unofficially. Hence, the demand for duty cut is not heard, “nor is government considering any such move,” explained one of the sources.

However, there was a proposal to ask gold dore refineries to import gold dore of purity less that 75 per cent gold content, but that seems to have not found favour among stakeholders.

“Another solution has been proposed for this where refineries may be asked to import dore only through nominated agencies or banks,” the source said.

There is another issue of moving gold from a bank, which imports on behalf of the importer, and selling it to the second-stage dealer. Banks give delivery from vaults, but further trades are happening by hand carrying gold.

A proposal was made to sell gold by delivering it from vault to vault only. However, due to insufficient vault infrastructure and difficulties faced by small dealers in handling gold through vaults, apart from compliance cost, the proposal may be dropped and rather the current system of using angadiya network for transferring gold may continue.

Photograph: Truth Leem/Reuters