Though the implementation is slated for January 15, 2021, it is uncertain how the government is prepared for the infrastructure and logistics challenges. In addition to the serious FDI roadblocks this creates, it is unclear how this disruption will affect the jewellers or benefit the consumers.
Arjun Raghavendra M
The Bureau of Indian Standards (BIS) Act 2016 empowers the central government to notify precious metals for hallmarking (the standard mark, which indicates the proportionate content of precious metal in that article), in a specified manner.
Consequently, the consumer affairs department notified gold/silver jewellery and artefacts (June 14, 2018) as precious metals to be hallmarked. Through a January 15 order the department made hallmarking ‘compulsory’ for selling of gold jewellery (14, 18 and 22 carats) only through certified sales outlets by registered jewellers, after fulfilling the norms specified in the Bureau of Indian Standards (Hallmarking) Regulations, 2018.
The bureau becomes an all-powerful body for the gold industry now. No person shall import, distribute, sell, store or exhibit for sale, gold articles except under their certification. It may, by an order, grant, renew, suspend or cancel certification of hallmark of a jeweller and shall monitor the systems, service and process quality of the gold articles, for which they may indulge in market surveillance or survey of articles. Also, if the certification officer has reason to believe any contravention of these provisions (or that articles without hallmarking have been secreted in any place or vehicle), she may search, seize the gold and impose a penalty (up to Rs 500,000) or launch prosecution, which may lead to imprisonment for up to one year.
In case of offences committed by a company, every director, manager, secretary or any other authorised representative shall be guilty of the offence and punished irrespective of the fact that the offence has been committed with or without the consent or connivance of, or is attributable to any neglect on their part. The severity of this provision and whitewashing of the ‘intent’ in commission of the offence, empower officers with arbitrary authority causing great apprehension regarding abuse of power.
Though the implementation is slated to commence from January 15, 2021, it is uncertain how much the bureau is prepared for the infrastructure and logistics challenges.
The jewellers will need to sell off their existing stock in the next 12 months. International brands that have set up stores in India shall have to comply with these standards and cannot indulge in sale of jewellery other than 14, 18 and 22 carats, thereby posing a serious roadblock for the FDI in jewellery retail in India. The legislative intent behind doing away with seven other grades (including 24 carat which finds mention in customs import tariff) remains uncertain.
While it is being argued that the employment in the assaying and hallmarking avenues will increase with hallmarking centres to be set up in every district to reach out to around 450,000 goldsmiths and over 100,000 gold jewellers, it is unclear how this disruption will be absorbed by an industry which is yet to rebound from the after-effects of demonetisation.
Increased compliance costs, augmented documentation (for certification, registration and hallmarking), apprehension of enforcement, inadequate mechanism to audit certifications, lack of in-built measures against harassment (particularly, corruption) and the arbitrary power to suspend/cancel certification shall definitely bring back the fear of inspector raj in an industry that is still struggling to bury the ghosts of the gold control era. Also, how much the consumer will benefit, if the compliance and other costs are passed over, is unsure.
Though the BIS gold hallmarking, voluntary at present, has been ongoing for close to two decades now, with 892 assaying and hallmarking centres, it has not even been able to cover 40 per cent of the constituents and fake hallmarking continues to be a rampant problem. In the absence of any mechanism to redress grievances in the present scheme, an earnest dialogue to bridge the trust deficit between the government and the small and medium jewellers will be a positive step at redefining existing perceptions.
In August 23, 2017, the government notified the gems and jewellery sector as a reporting entity under the Prevention of Money Laundering Act (PMLA), and all entities were required to maintain records of all transactions of value exceeding Rs 1,000,000 and all cross border wire transfers of more than Rs 500,000. This move created chaos and confusion. While rescinding this in October 2017, the government promised to notify under the PMLA a new threshold for reporting to authorities about transactions with a view to curb parking of black money in bullion. This commitment, under the Financial Action Task Force (FATF), is yet to be realised.
Owing to the non-traceability of the gold route, this legislative measure cannot curb smuggling. It does not amend the KYC procedures for the industry or make the GST rules applicable for exchange of old jewellery. So, is it just a decorative measure for complying with the quality control order of the WTO, the draft policy of which was not commented upon by the industry even after a 60-day public notice?
This legislation creates more government for implementation of this law by authorising for a bureau and governing council, which in turn shall constitute executive and advisory committees. While the government gears up for a national-wide awareness campaign on mandatory hallmarking for jewellers and common consumers clubbed with an outreach through social media and other forums, the questions pertaining to the inclusive nature of the implementation that should factor in the last jeweller in a remote rural corner of India, deserves urgent and unequivocal attention.
This initiative, intended to ensure that consumers are not cheated while purchasing gold, will be a tightrope walk for all stakeholders and a new episode in the great Indian gold story.Arjun Raghavendra M is a Delhi-based advocate who previously worked for the Government of India. Views are personal.
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