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Money laundering norms stump jewellery sector

August 29, 2017 16:56 IST

Dealers with turnover of Rs 2 crore and above covered; industry says threshold too low

The central government has notified the money laundering rules for the gems and jewellery sector with immediate effect.

Now, any entity deals in precious metals, precious stones, or other high-value goods and has a turnover of Rs 2 crore or more in a financial year will be covered under the Prevention of Money Laundering Act, 2002 (PMLA, 2002).

 

The limit of Rs 2 crore would be calculated on the basis of the previous year’s turnover, said the notification. The directorate general of goods and service tax intelligence has been appointed under the Act.

Sources said the government’s move to apply the PMLA to the jewellery sector was a fallout of income-tax raids on jewellers soon after demonetisation last November, when it was found that they sold gold and jewellery at a huge premium and accepted old currency notes as payment.

The notification, issued on August 23, has surprised the sector.

Surendra Mehta, secretary, Indian Bullion & Jewellers Association, said: “The Rs 2 crore threshold is low. It means jewellers even in rural areas will be covered under this.

This also means that all receipts and payments will have to be KYC-compliant for cash transactions of Rs 50,000 or more.”

This increases the compliance burden for jewellers along with the permanent account number requirement, which should match with other identity proof.

The government last Friday banned gold coins and other valuable articles imported at zero duty from South Korea under the Free Trade Agreement, and before that had banned exports of jewellery of above 22 carat (24 carat is pure).

Sources in the trade said that “henceforth jewellers will have to be careful about dealing in cash.

Since PAN is now linked to Aadhaar, dealers will find it difficult to quote the wrong PAN card number.”

So far a parallel economy was vibrant in the gems and jewellery sector. Black money was pervasive in it. The organised sector, however, had largely stayed away from it.

Owing to the 10 per cent basic customs duty, bringing gold through the unofficial route was lucrative.

Now, experts believe, “gold smuggled into India is sometimes moving to the organised sector also.

But due to money-laundering provisions, two parallel channels, one dealing in officially imported gold and another in unofficial import, could start operating.”

Under the scanner

The new Act will cover many jewellers in rural areas

The limit of Rs 2 crore would be calculated on the basis of the previous year’s turnover

All receipts and payments will have to be KYC-compliant for cash transactions of Rs 50,000 or more

Experts say official and unofficial trade will run parallel

Photograph: Anindito Mukherjee/Reuters

Rajesh Bhayani in Mumbai
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