Indonesian imports, PAN submission to affect gold trade in India

There is a bad news for those who love the yellow metal. The gold trade would be affected in the country as result of increased competition due to duty free jewellery imports from Indonesia. At the same time, there would be fall in rural demand for the precious metal from June 1 when PAN card would be required to purchase gold jewellery worth over Rs 1 lakh.

According to experts, jewellery imports from Indonesia are "completely detrimental to the interest of the gold trade" in the country. On the other hand, as agricultural income doesn't come under the tax net, many farmers don't have PAN cards. This would be a blow to the trade as rural India accounts for 60% of the total gold consumption of 811 tonnes in the country.

Trade insiders say gold jewellery imported from Indonesia under the free trade agreement (FTA) is affecting the domestic business that has to pay an import duty for gold. "Gold attracts an import duty of 10%, which makes the landed price of gold costlier. And automatically our jewellery prices go up," Manish Jain, chairman at Gem & Jewellery Trade Federation (GJF), told the Economic Times.

The issue has been brought to the notice of the commerce ministry," he said.

The development comes at a time when the domestic demand is not picking up. Jewellers fear the market condition may get worse as buyers will soon have to show their permanent account number (PAN) card issued by the income tax department if they purchase jewellery over Rs 1 lakh.

"The move to make PAN card mandatory for high-value transactions will surely impact retail sales. Rural demand of gold will be hard hit," said Bachhraj Bamalwa, director at GJF.

And branded jewellers are increasingly penetrating to rural markets. Samir Sagar, director of Mumbai-based Manubhai Jewellers, said rural customers save for years to buy gold for weddings. "Now, if jewellers ask for PAN cards, they will get scared," he said.

The PAN mandate may also impact demand from housewives who buy non-marriage gold jewellery. "Usually, they do not have PAN cards, and even if they have, they do not want to carry these cards to jewellery outlets," Sagar said. Jain of GJF said representatives of the federation have met Finance Minister Arun Jaitley to request him to raise the limit to Rs 5 lakh worth of gold jewellery for furnishing PAN details.

"He has assured us that some positive step will be taken before June 1," he said.

This year the World Gold Council has kept a consumption target of 900-1,000 tonnes for India.

(Image: Indiatimes)