Crackdown on gold traders: Nov 15 may be last day for jewellers to deposit old notes

November 15 will be the last day for  jewellers to deposit old high-value currency notes, sources told Business Standard as the government cracks down on gold traders to prevent the laundering of black money. 

The gold and jewellery route has been followed by persons with black money to convert their Rs 500 and Rs 1,000 notes at a haircut of 20-40%.  Jewellers on condition of anonymity have revealed that some were selling 10 gms gold for as much as Rs 50,000 against the market price of Rs 30,000. 

The modus operandi is to use  unaccounted gold stock against receipt of demonetised currencies at a heavily discounted rate. Many of these bullion traders have been issuing bills for less than Rs 2 lakh to clients that exempts them from furnishing PAN numbers.

Jewellers stayed open into the early hours of Wednesday, and one well-placed industry source in Mumbai estimated that about 250kg of gold  was sold in the city within a few hours of the ban. The source said jewellers were paid anywhere between 20 and 65% above the going rate by buyers snapping up the precious metal with old notes.

The finance ministry has instructed all its revenue intelligence agencies to join the crackdown on jewellers and hawala operators besides tracking movement of demonetised currency notes. 

The Enforcement Directorate (ED) and the Directorate General of Central Excise intelligence (DGCEI) have now joined the income tax department in the crackdown.

This move will halt such sales of gold at a huge premium against old currency notes, which jewellers were doing till the Income Tax (I-T) department raided them across the country on Friday and sent around 600 notices to jewellers asking the details of daily sales from November 7 to 10. The I-T department, in its notices, also asked for CCTV footages, especially of cameras near cash counters, to seek date-wise information and to check if PAN numbers or ID proofs were collected from customers. 

Another rumour in the market is about banning import of gold till March 2017, which according to sources, is unlikely, but will not be surprised to see some restrictions on imports till end-December. 

If gold imports are restricted or banned for a few months as the buzz suggests, selling existing stock or recycled gold will be the only source for business. However, such restrictions will take premiums higher and some old idle jewellery with households may be sold in market at a premium, said an analyst.