New Indian rule backfires, boosts unofficial gold trade
By Rajendra Jadhav
Tuesday, February 2, 2016
MUMBAI -- Try as it might, the Indian government appears to be unable to curb the country's love for gold.
Its latest attempt -- a rule forcing buyers of high-value jewellery to disclose their tax code -- has boosted unofficial trading in the world's second-biggest gold consumer, industry experts say, rather than promote transparency and dent demand.
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If the rule does fail, gold inflows will continue unabated in India, flying in the face of Prime Minister Narendra Modi's efforts to curb costly imports and stop the metal from being used to hide billions of dollars of undeclared "black money."
India made it mandatory for customers to disclose their tax code, or Permanent Account Number (PAN), for purchases above 200,000 Indian rupees ($2,948.44) from Jan. 1.
This was done to track larger deals and deter the hundreds of millions of Indians outside the tax net from buying gold to keep their wealth out of sight of the authorities.
But jewellers and dealers say the opposite has happened.
"Some jewellers are moving to unofficial trade from official," said Mayank Khemka, managing director of jeweller Khemka Group of Cos. "No one wants to lose customers just because they don't have a PAN card."
To skirt the rule, jewellers and buyers are issuing many small invoices and informal receipts. ...
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