The central government's recent move for compulsory declaration of permanent account number (PAN) for jewellery purchases of and over Rs.1 lakh will lead to a surge in smuggling of gold, a section of jewellers said on Monday.
"While we welcome the centre's initiatives to control black money, we also need to understand that the compulsory declaration of PAN for jewellery purchases on and above Rs.1 lakh will increase smuggling," immediate past president of All India Gems and Jewellery Trade Federation Bachhraj Bamalwa told media persons here.
He said since the nation has roughly ten crore PAN cards and the rural population is unaware of it, customers may be reluctant to declare the card during transaction and go to "unethical" jewellers for the purchase.
According to Bamalwa, while the domestic jewellery market entirely comprises the organised segment who issue proper bills on purchase, the unorganised segment may come up.
"We need to remember since the transaction will become illegal if the customers do not provide their PAN card, the gold which will be used will also be illegal," he said, adding "if you go for illegal transaction, you will also get gold which is illegally procured".
The association, representing over 600,000 jewellers nationally, said 200 tonnes of gold are being illegally imported to India of which a meagre 0.1 percent has been seized by law enforcement authorities.
Furthermore, the association's governing board of director Samar Kumar De said since the housewives do not possess a PAN card, they may be reluctant to buy the yellow metal.
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"In the present situation, Rs.1 lakh can fetch only 30-35 grams of gold. The imposition (of PAN card) from the centre is not practical as it will discriminate 70 percent of the rural buyers as they are not under (income) tax net and do not have PAN cards," he said.
The trade body also said it is better for the industry if the import tax on the precious metal is reduced from the current 10 percent to two percent.
"We had a meeting with the commerce minister on this and she was also of the same view. We expected this to happen in the budget, but are disappointed," Bamalwa said.
Union Finance Minister Arun Jaitley, presenting the budget for 2015-16 last month, had made declaration of PAN number mandatory for jewellery purchases.