The central government's directive making buyer's PAN card declaration mandatory for jewellery purchases exceeding Rs 2 lakh may wreck havoc on organised jewellery market in the country as the segment fears losing a considerable amount of its market size.
While the centre has chalked out this strategy - effective January 1, 2016 - to curb black money, All India Gems and Jewellery Trade Federation (GJF) - the country's jewellers' national apex trade body is pessimistic about the move.
The directive, jewellers fear, will result into the Rs 1,57,500-crore organised market shrinking by about 22% in size a year.
According to officials in the association, this loss will translate into a whopping chunk of Rs 34,650 crore share of the organised market moving over to the unorganised jeweller's segment which will promote unscrupulous trading.
While the total jewellery market size in India is pegged at an enormous Rs 3,50,000 crore, the space is mostly dominated by the unorganised jewellery segment, which commands around 55% of the total market size.
With the organised market losing a considerable pie, jewellers who are upgrading themselves to this section of the trade may be discouraged.
"The number of jewellers in the organised market in India are growing at a minimum pace of 15%," Subir Kumar Sen, director of B C Sen & Co, which is affiliated to GJF, told Business Standard.
Jewellers selling non-hallmarked gold and having no standardised operational procedure are classified as the unorganised jewellery sector.
Sankar Sen, managing director of Senco Gold, said monthly sales of gold items valued at Rs 2,00,000 or more may dip by a staggering 50% as people not possessing PAN cards will prefer to buy from the unorganised sellers.
Supporting Sen's statement, the association's former chairman Bachhraj Bamalwa said, "More transactions will happen out of the books in the unorgansied segment - this is our main concern."
The enforcement moreover, may have a boomerang effect on the government's tryst to contain black money as well.
When probed about the possibility of a misreckoning effect on black money, Shubadip Roy of Bengal Jewellery said, "As the non-PAN card holders will have no other resort than to buy from the non-hallmarked gold sellers who may not disclose the sale to the authorities, the money will become unaccounted."
Besides, authenticity of the gold from these sellers is a matter of concern.
Under all circumstances, the loss of market as well as sales will be more intense in rural markets where an estimated 70% people do not posses PAN cards.
As per the trade federation, around 23 crore PAN cards have been issued so far by the government to a population of 125 crore.