Express fear that new procedures will hit hard legitimate trade and drive gold business into black market
Proposals on gold made in the Union Budget has led to a pale of gloom among dealers of the yellow metal who fear that the increased costs and new procedures would hit legitimate trade hard and drive the business into the black market.
In the Budget, Finance Minister Pranab Mukherjee had proposed to increase customs duty to four per cent for gold coins, bars and platinum, and bring in unbranded jewellery under the excise duty gambit by levying one per cent.
M.S. Balasubramanian, president of the Tamil Nadu Jewellers' Federation, told The Hindu here on Thursday that these proposals would make an one-kilogram gold bar cost at least Rs. 1.20 lakh more than the price in international market. This would, obviously, provide an incentive for smuggling gold and provide a boost to illegal trading.
This, he feared, would hit the legitimate dealers hard as customers would prefer to buy from the black market owing to the cost difference. Not only would this hit the jewellers but also the economy also as more the gold trading goes underground, more the tax revenue the government would lose out, he added. While a token strike was observed in Tamil Nadu, he said that more action would be contemplated if the Centre did not roll back these measures. He also noted that jewellery shops in many States remain closed.
Ba. Ramesh, Joint Managing Director of Thangamayil Jewellery Limited, a listed company, said that apart from increased customs duty, the move to bring in unbranded jewellery under the excise duty and the introduction of new procedures for selling gold were bound to have even greater adverse impact.
Levying excise duty would lead to more paperwork and increased scrutiny for jewellers.
Further, another new proposal was mandating customers who buy gold worth over Rs. 2 lakh to pay an one per cent Tax Collection at Source (TCS), which they can claim back while filing their tax returns. This requires the customer to furnish their PAN number.
“How many customers from villages and rural areas who buy gold in large quantities for marriages will have PAN cards? Further, will they pay one per cent more than the price in the tags and accept the argument that they could claim it back,” wondered Mr. Ramesh.
One measure that could provide great relief, he said, was merging the excise duty with customs duty as it would at least cut down on procedures and paper work.
These increases would result in reduced investment in gold as legitimate dealers would be apprehensive if they could recoup their costs, he added.
Lack of clarity
K.V.K.R. Prabaharan, vice-president of Madurai Jewellers and Bullion Merchants' Association, said that excise duty was new to the gold trade and there was a complete lack of clarity even among Central Excise officials on its implementation.
In subsequent discussions, officials at different levels interpreted the act differently. The Central Government must come out with a clear definition and give in writing to remove ambiguities. The new Budget proposals also contain onerous proposals and make the task of bookkeeping even more difficult, he added.