Thousands of jewellers in India have gone on strike this week to protest against the introduction by the government of tougher tax control for large gold buyers, a local source said on Thursday.
The strike, which started on Wednesday and caused the de facto closure of the physical gold market in India, is in opposition to the implementation on January 1 of mandatory checks of Permanent Account Numbers (PAN) on jewellery purchases exceeding 200,000 rupees ($2,924).
“The bullion market is closed in India as traders protest against the government’s decision to make PAN cards mandatory for transactions of 200,000 rupees and above,” a source said.
“Some people buy gold to hide black money – now if they buy gold they have to show their income tax number, so they will avoid [doing it]. That’s why jewellers are on strike,” he explained.
Jewellers have complained about lower sales since the anti-money laundering legislation came in because most of the country’s population do not pay tax or do not have tax identification numbers.
Less than three percent of India’s 1.2 billion-strong population pays income tax, according to government figures cited by local media.
Moreover, only 20 percent of the population owns a legitimate PAN card, according to some estimates. In rural areas, few possess a PAN card although this sector is traditionally the largest domestic consuming sector – farmers use gold as their primary store of wealth because they have limited access to the formal banking system.
For more than five years, Indian citizens have been required to present PANs on any purchase above 500,000 rupees. But many jewellers have reportedly avoided the rules by writing up several different receipts of below 500,000 rupees to make up the amount of a consumer’s purchase, FastMarkets reported last year.
(Additional reporting by Ian Walker, editing by Mark Shaw)