Govt likely to put curbs on jewellers

Arun Jaitley
On Rajat Sharma's show Aap Ki Adalat on India TV, Finance Minister Arun Jaitley mentioned thrice that shops of a particular industry were open till very late in the night after Narendra Modi' s demonetisation announcement . He was obviously referring to jewellers who were selling gold by accepting withdrawn currency notes, which has continued. 

According to sources, the government is likely to clamp down on jewellers and Tuesday, November 15, will be the last day for them to deposit old high-value currency notes. 

The gold and jewellery route has been followed by persons with black money to convert their Rs 500 and Rs 1,000 notes at a haircut of 20-40%. 

This move will halt such sales of gold at a huge premium against old currency notes, which jewellers were doing till the Income Tax (I-T) department raided them across the country on Friday and sent around 600 notices to jewellers asking the details of daily sales from November 7 to 10. The I-T department, in its notices, also asked for CCTV footages, especially of cameras near cash counters, to seek date-wise information and to check if PAN numbers or ID proofs were collected from customers. 

Another strong rumour in the market is about banning import of gold till March 2017, which according to sources, is unlikely, but will not be surprised to see some restrictions on imports till end-December. 

Sudheesh Nambiath, lead analyst, precious metals demand, GFMS, Thomson Reuters, said, Banning imports would send a wrong message to the industry. The government hasn't been against the industry and is only interested in streamlining the process and restrict movement of unaccounted money to gold and jewellery. The buzz that jewellers will be asked to deposit cash till November 15 in itself will take care of the diversion of old currency notes to gold, diamonds, silver and precious stones. Banks are heavy on data currently with multiple inter-relationships on variables and running a good analytics can easily identify accounts with spurious deals. That is a more intelligent approach than banning gold import.

If gold imports are restricted or banned for a few months as the buzz suggests, selling existing stock or recycled gold will be the only source for business. However, such restrictions will take premiums higher and some old idle jewellery with households may be sold in market at a premium, said an analyst. 

Meanwhile, other methods of laundering black money hoarded in the banned notes are also flourishing. Some chartered accountants are using their smaller clients to launder their larger clients money. Up to 35-40% premiums are quoted for such entries by CAs. Some players have used daily wage earners to exchange Rs 4,000 and in return they were given more than their daily wages. In cities such as Surat and Ahmedabad, workers made Rs 600-1,000 for each exchange of Rs 4,000. Reports of very long queues outside banks also include such persons, said a Gujarat-based trader. 

While the hawala market or unofficial foreign currency market has come to a virtual standstill, some dealers have sold dollars between Rs 85 and Rs 110 against the official rate of around Rs 67 per dollar. 

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