Buying gold: Centre unlikely to ease PAN norms or cut import duty

Gold buyers are unlikely to get any good news on relaxation of norms when Finance Minister Arun Jaitley speaks on the Finance Bill during the second leg of the Budget session.

“At present, there is no plan to give any relaxation in the PAN requirement. Also, there is no thinking on cutting import duty on gold,” a senior Finance Ministry official told BusinessLine on condition of anonymity.

Jaitley, in his Budget speech on February 28, proposed mandatory quoting of PAN (Permanent Account Number) for any cash purchase or sale exceeding ₹1 lakh. This, he said, is meant to curb generation of black money domestically.

The fine print Though the proposal did not mention any specific article, officials clarified that it includes various commodities, including bullion. At present, Rule 114(B) of the Income Tax Rules, 1962, prescribes mandatory quoting of PAN in “payment to a dealer against a bill for an amount of ₹5 lakh or more for purchase of bullion or jewellery”. With the proposed change, the threshold will come down to ₹1 lakh.

Bullion merchants have been opposing this move. They argue that going by the present rate of around ₹26,000/10 grams (22 carats) to ₹27,800/10 gm (24 carats) in Delhi, plus making charge and margin, any jewellery over 35-40 gm would require quoting of PAN. They also feel that the percentage of the population having a PAN card is low. According to a Parliament question, over 20.95 crore PAN cards had been allotted as on July 25, 2014.

However, Finance Ministry officials said that bullion and real estate are the two big segments responsible for back money generation domestically.

“When efforts are being intensified to curb black money generation and the proposal was included in the Budget with a specific purpose, why will we take a step backward?” an official had said earlier. However, he added that any change in the tough stance will be a ‘political call.’

The official also said that despite higher duty, gold imports are on the rise. The latest trade data show that gold imports almost doubled in March. It was widely expected that after the scrapping of the ‘80:20 scheme’ (introduced in 2013 and scrapped last year — it prescribed that any entity importing gold had to re-export 20 per cent of it in value-added form), the government would lower duty to curb smuggling. However, a spike in legal imports has dimmed the prospects of such a move.

Another reason for not lowering the duty is higher collections. During the April-November 2014 period, ₹10,600 crore was mopped up, a year-on-year rise of 65 per cent.