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Gold trade to be hit by Indonesian imports, fall in rural demand |
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KOLKATA: The gold trade in the country is facing a double whammy of increased competition due to duty free jewellery imports from Indonesia and an anticipated fall in rural demand from June 1 when submission of PAN becomes mandatory for buying jewellery worth over Rs 1 lakh.
Trade insiders say gold jewellery imported from Indonesia under the free trade agreement (FTA) are is hurting the domestic business that has to pay an import duty for gold. "Gold, the raw material for jewellery, attracts an import duty of 10%, which makes the landed price of gold costlier. And automatically our jewellery prices go up," said Manish Jain, chairman at Gem & Jewellery Trade Federation (GJF).
"We have brought this to the notice of the commerce ministry," he said. Pankaj Parekh, vice-chairman at Gem & Jewellery Export Promotion Council, too, said jewellery imports from Indonesia are "completely detrimental to the interest of the gold trade".
The development comes at a time when the domestic demand is not picking up. Jewellers fear the market condition may get worse as buyers will soon have to show their permanent account number (PAN) card issued by the income tax department if they purchase jewellery for more than Rs 1 lakh.
"The government's move to make PAN card mandatory for high-value transactions will surely impact retail sales. Rural demand of gold will be hard hit," said Bachhraj Bamalwa, director at GJF. He pointed out that since agricultural income doesn't come under the tax net, many farmers don't have PAN cards. This will be a blow to the trade as rural India accounts for 60% of the total gold consumption of 811 tonnes in the country.
And branded jewellers are increasingly penetrating to rural markets. Samir Sagar, director of Mumbaibased Manubhai Jewellers, said rural customers save for years to buy gold for weddings, and usually do need-based buying than impulse buying. "Now, if jewellers ask for PAN cards, they will get scared," he said.
The PAN mandate may also impact demand from housewives who buy non-marriage gold jewellery. "Usually, they do not have PAN cards, and even if they have, they do not want to carry these cards to jewellery outlets," Sagar said. Jain of GJF said representatives of the federation have met Union finance minister Arun Jaitley to request him to raise the limit to Rs 5 lakh worth of gold jewellery for furnishing PAN details.
"He has assured us that some positive step will be taken before June 1," he said. This year the World Gold Council has kept a consumption target of 900-1,000 tonnes for India.
Source : economictimes.indiatimes.com
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