Making PAN compulsory to buy gold will affect rural buyers says Jewellery Traders' Chief

by Sathishbabu Raghav Financial Adviser

The chairperson of All Indian Gems & Jewellery Trade Federation (GJF) Nitin Khandelwal, has recently spoken about the decision to make PAN card compulsory for buying or selling gold. There are around 29 crore PAN card holders in India. This means that only 18-20% of the population of this country has PAN card.

It is difficult to gauge why economists are advising to make PAN compulsory for buying or selling of gold, Khandelwal said. It is upsetting that again and again the gold industry is being targeted by so many policy makers and experts, instead of backing it up to become more organized and compliant, he said.

70% of the gold industry generates business from rural markets where people do not have PAN cards. Also, they do not fall under the tax bracket because they generate their income from agriculture.

These earnings are mostly saved in gold jewellery, informed Khandelwal.

Gold is the only commodity that helps people stay strong during the financial crisis. Especially during natural calamities like earthquakes, floods, drought, people depend on gold as it can be encashed easily. If PAN cards are made compulsory, official business will witness a sharp drop and selected jewellers promoting non-billed cash sales will come up like never before, informed Khandelwal.

Proposal to make PAN compulsory for all transactions related to gold

As per a proposal by financial regulators, gold transactions from jewellers should require a PAN. This panel was set up after the recommendations put forth by the subcommittee of the Financial Stability and Development Council. This proposal was put forth in order to prevent all gold transactions through the underground market that in turn will result in tax evasion.

Currently only those that cost over Rs.2 lakh or over need PAN cards. The panel has also asked for registration of all gold transactions using a depository.

The panel also noted that gold holdings within the country were higher than the standard globally and greater returns can be achieved by households via relocating gold into financial assets.