Hallmarking restrictions push gold biz to informal sector

A BIS notification limits hallmarking of ornaments to three purities of gold

Around half the jewellery hallmarking business has shifted to the non-hallmarking segment, which is mostly controlled by unorganised sector players, due to a notification restricting hallmarking of only three purities of gold ornaments.

Effective January 1, 2017, the Bureau of Indian Standards (BIS) has confined hallmarking of jewellery to ornaments with 22 carat, 18 carat and 14 carat gold. Of these categories, ornaments with 22 carat and 18 carat are dominant, as consumers normally do not prefer jewellery made with 14 carat gold. Hallmarking of gold ornaments is also optional for most consumers in India.

"Since hallmarking has been confined to jewellery with 22 carat, 18 carat and 14 carat gold, around half the hallmarked jewellery business has moved out of hallmarking net,' said Surendra Mehta, Secretary, Indian Bullion and Jewellers Association (IBJA).

A recent study by the World Gold Council (WGC) estimates that 60-65 per cent of jewellery made in India is handmade. The figure was much higher a decade ago -- the rise in machine-manufactured jewellery has led to a drop in the share of handmade jewellery.

There are about 350 hallmarking centres across the country. The WGC has recommended to the BIS to strengthen governance around hallmarking processes, drive customer awareness of hallmarking and incentivise expansion of hallmarking centres among other measures, to improve standardisation of jewellery sales in India.

Meanwhile, IBJA has urged the BIS to expand the horizon for jewellery hallmarking to other categories also. In a letter to the BIS and its parent ministry, the Ministry of Consumer Affairs, IBJA said, "The BIS has discounted mention of gold jewellery of other purity levels for hallmarking in the latest amendment to its guidelines. This is a complete deviation from the earlier hallmarking circular. In India, most jewellery is handcrafted and "made as per order". Some of the traditional jewellery is specifically made in different purity as per customs and tradition. Hence, confining to just three types of hallmarking would lead to customers forcibly shifting to non-hallmarked jewellery."

In its response, the Ministry of Consumer Affairs has forwarded the representation by Mukesh Mehta, National President of IBJA, to the BIS for appropriate action.

Nitin Khandelwal, Chairman of All India Gems and Jewellery Trade Federation, said, "We would soon consult the appropriate authorities seeking liberalisation in the hallmarking policy."

Meanwhile, the jewellery sector was disappointed by the Budget due to the Finance Minister's "no cut in import duty".

Prithviraj Kothari, Managing Director, RiddiSiddhi Bullions Ltd said, "One of the biggest casualties of demonetisation was the bullion industry. Right from the beginning, we have been supporting the idea of digital payments, but at present industry looks for answers."

"The cash transaction limit was earlier not specified. Now it has been brought to Rs 300,000. Import duty on gold has not been reduced from the existing rate of 10 per cent. Also the know-your-customer (KYC) requirement limit remains at Rs 200,000 only. The bullion Industry had anticipated that custom duty would be reduced in Budget 2017-18, as import figure has dropped to 6 per cent from 10 per cent but with goods and services tax (GST) to be implemented in the near future, the industry is expecting a favourable duty," he added.

Organised sector bears the brunt
 

• BIS has stipulated that hallmarking should be restricted to ornaments with a gold content of 22 carat (ct), 18 ct and 14 ct
• Gold ornaments with 22 ct and 18 ct are prevalent because consumers in India do not prefer jewellery with 14 ct gold
• Hallmarking of gold ornaments is optional for most consumers in India
• A World Gold Council study estimates between 60 and 65 % of the jewellery manufactured in India is handmade