Jewellers await BIS rules on self certification
Reports of compulsory hall-marking of gold jewellery after the government notified the revised Bureau of Indian Standards (BIS) Act last week have sent ripples across the jewellery industry.Many big players have started claiming they sell only hallmarked jewellery.However, those selling non-hallmarked jewellery are prioritising sale of such jewellery and others are considering various options, including self-certification, till all jewellery is hallmarked.
According a report released two years ago by the World Gold Council, “Only 30 per cent of Indian gold jewellery is currently hallmarked.There are wide spread differences in purity and an average under caratage of anywhere between 10 per cent and 15 per cent.” Making hallmarking of gold jewellery compulsory hasabig impact from the gold demand perspective as old jewellery will have to be converted to new compliant jewellery and its caratage will also have to be 14, 18 or 22, as mandated by the BIS Act, once it is implemented.
Sudheesh Nambiath, lead analyst, Precious Metals Demand,GFMS Thomson Reuters, said, “From the fresh gold demand perspective, it could be significant as we are looking at conversion of average 85 per cent purity (sold as 91.6 per cent) jewellery to actual 91.6 per cent.” Jewellers, on average, sell less pure jewellery, especially in northern states and in rural area where hallmarking has not picked up. The national average of purity is estimated at 85 per cent compared with the claim of 100 per cent.
One big jeweller said those selling less pure or non-hallmarked jewellery “would want to get rid of the jewellery that is of lower purity”.There should be good discounts offered to customers, he added.The government note on the BIS Act, 2016, said, “In the new Act which came into force from October 12, enabling provisions have also been made for making hallmarking of precious metal articles mandatory.
The new Act also allows multiple types of simplified conformity assessment schemes, including self-declaration of conformity against a standard, which will give simplified options to manufacturers to adhere to the standards and get certificates of conformity.” Jewellers are also waiting for detailed rules from the BIS how self-certification will be permitted and whether these will solve their problems.
However, sources Business Standard spoke to said the government would provide time for handling old stocks that were not in conformity with the Act.Tanya Rastogi, director, Lala Jugal Kishore Jewellers, one of Uttar Pradesh´s old jewellery houses, said, “The bigger jewellers are already mostly dealing in hallmarked goods.
In fact, they shall regain sales they lose to smaller jewellers due to higher prices.That said, 70 per cent of the gold is actually consumed in the rural sector in our country and is rampantly nonhallmarked.This ratio of non-hallmarking becomes wider in areas like my state UP. That´s where sales shall be hurt.”
Gold imports by banks get IGST exemption
The government has issued a notification allowing 36 banks and five canalising agencies, including MMTC and MSTC, to import gold without payinga 3 per cent integrated goods and services tax (IGST). It´sabig relief for financial institutions importing gold, as the 3 per cent tax was an additional burden on them.
Till now, importers´ working capital used to get blocked until they got the refund on GST paid.However, the new notification removes that hurdle and smoothens the process of import.Analysts say gold imports on a consignment basis, which had almost stopped after the implementation of the GST, will resume again.So far, most import was happening as gold metal loans usually by banks.
In the case of consignment import, an importer kept gold ready in stock and it was priced when sold. This was helpful as sudden demand helped banks to give virtually spot delivery.However, due to the 3 per cent IGST payable on imports, banks and other agencies had stopped it.
The latest notification doesn´t change anything for traders who will have to pay 10 per cent import duty and 3 per cent IGST and claim back the IGST as input credit.Gold refineries that import dore gold or unrefined gold, will have to pay the IGST and hence, they are at a disadvantage compared to refined gold importers.
Surendra Mehta, national secretary, Indian Bullion and Jewellers Association, said, “Removing the IGST on gold imports and not on dore imports (gold dust) will kill Indian gold refining industry.
The Business Standard, New Delhi, 17th October 2017