Cracking the PAN Puzzle

Submission of PAN number is made compulsory for all transactions above `2 lakh with effect from January 1, 2016. Such move is introduced to curb black money in India. The jewellery industry is unhappy with the regulation and following are the reasons.

The central government has made it a must to quote the permanent account number (PAN) for all transactions above `2 lakh in a bid to curb black money. The new norms regarding quoting of PAN number for all transactions exceeding a specified limit came into force on January 1 this year. While they cover most sectors of the economy, vocal opposition to the move has come mainly from the jewellery industry which believes it will lead to a 20-25 per cent decline in recorded business volumes.

Close to 99,000 retailers from all-over India went on indefinite strike on February 10 losing around `13.5 crore of revenue from value-added tax in a single day. According to Suvro Chandra, joint managing director of P C Chandra Jewellers, customers are reluctant to buy as a majority either don’t have a PAN card or fear a declaration.“An option to fill up Form 60 has been given to people who do not have a PAN card but people are reluctant to fill all the 24 sections in that form. We, like the industry, have lost about 30 per cent sales in January,” he told Business Standard.

Mr. Rajesh Kalyanaraman interacting with JTGJS exhibitors

Mr. Rajesh Kalyanaraman, ED, Kalyan Jewellers

Rajesh Kalyanaraman also expressed his concerns about the newly introduced PAN norm by Government. He said, “It’s definitely going to impact the industry. With the strike, we are trying our best to inform the government about the issues that can arise due to such norm.”

Jayantilal Challani, President of Madras Jewellers and Diamonds Merchants’ Association was also of the same opinion and said, “The government to roll back this threshold of mandatory PAN declaration to `5 lakh.

Jayantilal Challani

Jayantilal Challani, Founder, Challani Jewellery Mart

This way we will be able to carry on our usual business.”

While opposing the new norms for quoting PAN numbers in high value transactions, the jewellery industry must also take the lead in evolving a framework for achieving greater transparency that takes into account its unique history, nature of the product and other specific features. Representatives of jewellers associations from across the country held meetings and decided to take up the issue with the authorities. They say that the existing limits of `2 lakh on sale of bullion and `5 lakh for jewellery should be maintained.


TanyaRastogi, Director, Lala Jugal Kishore Jewellers

Director of Lala Jugal Kishore Jewellers, Tanya Rastogi said, “Such move will have a massive and restructuring effect upon our industry. The government has declared the necessity of pan cards on all purchases of 2 lakhs and above, while only about 8-9 per cent of the population actually possesses pan cards. This is bound to deter the overall sales of gold in any form.” Contradicting from above statement, she further states, “There is also another way to look at it. The pan-card restriction is not only on our industry but the entire luxury industry- the high street labels, the watches, the expensive electronics and the likes. The money saved on those industries might just flow in to our industry as we do have the out through the form 69 where those without pan cards may declare so via a signature and go on to buy to their hearts content.”

The jewellery business (both organised and unorganised) is estimated at `3.5 lakh crore annually with majority of the revenue coming from the unorganised sector, according to the industry’s apex body All India Gems and Jewellery Federation (AIGJF). It said that bullion is more likely to attract unaccounted money than jewellery as it is easier to monetise, plus can be redeemed at near full value unlike in the case of jewellery where price includes a 15-20 per cent mark up on account of ‘making charges’ or value addition. Manufacturers and wholesalers are of the opinion that such move will impact the rural sales figure as most rural buyers don’t have PAN cards.

But, it’s more important contention is that over 70 per cent of buyers from the rural areas will be discriminated against under the new regime. These buyers fall outside the tax system and do not possess PAN cards. As a result they will be unable to legitimately purchase jewellery for festive occasions and weddings, or be forced to do so through illegal channels. The jewellers also say that the alternative offered by the government – getting non-PAN card holders to fill in Form 60 or 61 – will make the jewellery buying process difficult and once again encourage transactions that remain off the record.

Chairman and Managing Director of PNG Jewellers and Vice-president of India Bullion and Jewellers Association in Mumbai told, “The norm is for all other industries and not only for the gems and jewellery sector. I see this as a positive move.” When asked about the rural sales, he expressed, “Of course, but not many know about alternative form 60 or 61, that will allow non-pan card holders to purchase jewellery without going through much of hassle as per the new norm. It’s wrong to thing that this norm is only targeting at the gems and jewellery industry.”

The jewellery industry is divided into big organized players that use modern methods of business and a large number of small jewellers that use traditional methods. Many such small jewellers have tough time to achieve good business. Another thing is large value transactions are common and not restricted only to those with high disposable incomes. Even the small buyer often incurs huge expenses on a single transaction. Moreover, it’s common to see customers trading in old pieces of jewellery acquired perhaps as part of inheritance for something more contemporary; in most cases the old jewellery still retains a high value, allowing the customer to acquire something that may appear disproportionately expensive as compared to other expenses.

Such factors favour cash transactions. Titan one of the biggest corporate in gems and jewellery sector accounts for 10 per cent of overall turnover and this percentage can soar to 60-70 among small layers. Many jewellers also offer installment schemes that works against the rule released recently. Hence, there is a need for transparency in the new PAN norms.

-Rika Aash Pathak