Jewellers with an annual turnover of up to Rs 40 lakh will be exempted from the mandatory hallmarking.
The Ministry of Consumer Affairs, Food and Public Distribution has finally enforced the mandate for the hallmarking of gold jewellery after months of discussion and frequent postponement.
The government had initially issued the quality-control order for mandatory hallmarking of gold jewellery/artefacts on January 15, 2020, but the last date was extended to June 1, 2021, to clear old stock of non-hallmarked jewellery. It was later extended to June 15 and then to June 16.
Moneycontrol looks at what it means for the consumers and industry at large.
What are the new rules?
The government has made it mandatory for jewellers to hallmark gold jewellery, but with some relaxations. Jewellers with an annual turnover of up to Rs 40 lakh will be exempted from the mandatory hallmarking. Similarly, jewellery for international exhibitions, jewellery for government-approved business-to-business domestic exhibitions will be also be exempted. Watches, fountain pens, and special types of jewellery such as Kundan, Polki, and Jadau have also been given relaxation under the new regulation. It will also allow hallmarking of additional carats 20, 23, and 24.
There will be no penalties until the end of August so that manufacturers, wholesalers, and retailers of gold jewellery, get enough time to comply. Also, a committee comprising representatives of all stakeholders, revenue officials, and legal experts has be formed to look into the issues that may emerge during the implementation of the scheme.
What is hallmarking?
To certify the purity of precious metals such as platinum, gold, and silver, a hallmark or a mark is applied by the assigned lab after testing them. Some of the largest gold markets in the world such as Dubai, United Kingdom have mandatory hallmarking rules in place. In Dubai, Bareeq Certification ensures the purity of gold. The government has so far set up Assaying and Marking Centres in 256 districts of the country for hallmarking and the new rule is set to be enforced only in these districts initially. Under the hallmarking scheme of the Bureau of Indian Standards, jewellers are registered for selling hallmarked jewellery. BIS Hallmarking Regulations were implemented in June, 2018.
Why has the government taken the step?
While the government’s move will help consumers ensure the quality of gold jewellery they are buying, it will also help the country become a hub for buying gold in the world.
“The hallmarking of jewellery/artefacts is required to enhance the credibility of gold jewellery and customer satisfaction through third party assurance for the marked purity/fineness of gold, consumer protection,” the Ministry of Consumer Affairs, Food and Public Distribution said in a press release.
“This step will also help to develop India as a leading gold market centre in the world,” it added.
India is the second-largest consumer of gold in the world and in the first quarter of 2021, the country consumed 140 tonnes of gold, according to a report by the World Gold Council.
Shishir Mankad, Managing Partner and Head – Financial Services, Praxis Global Alliance, said, “Jewelry that conforms to the benchmark will enjoy a premium, this can bring out the family silver as households start to exchange their older jewellery for new, hallmarked jewellery. This can potentially help monetise the ~$ 1.5 trillion of gold and jewellerry that is sitting in the almirahs of Indian households.”
How will end consumers be impacted?
The development will beneficial for the consumers because this will bring accountability in the sector and hence, they can rest assured about the quality of their gold.
The new rules will not hurt the end consumer as the government has allowed jewellers to buy back old gold jewellery without hallmarks from the consumer.
Old jewellery can be hallmarked as it is, if feasible by the jeweller or after melting and making new jewellery, the press release said.
In terms of pricing also, the consumer won’t be impacted much, say experts, as the hallmarking charges will make a small portion of the overall price.
“We might see a small hallmarking fee initially but over time jewellers will find ways to absorb it through making charges and other means,” said Neelesh Hundekari, Partner, Consumer and Retail Practice, Kearney.
Impact on the jewellers and the industry at large
Large jewellery retail chains such as Tanishq, Kalyan Jewellers, will not be impacted by the new rule as they already are running organised operations and hallmark their jewellery, say industry watchers.
“Over 400 stores of Tanishq, Mia and Zoya, across 215 towns are registered under BIS and have the hallmarking license and 100 percent of the inventory being sold from all our stores is hallmarked,” said Ajoy Chawla, CEO, Titan Jewellery, Titan Company.
The development, however, companies and experts believe make the industry more organised.
“Mandatory hallmarking will standardise the purity of gold jewellery and take the industry towards being more structured as well as further push the ongoing shift of business and customers from the unorganised to the organised jewellery segment,” said Ramesh Kalyanaraman, Executive Director – Kalyan Jewellers.
The small businesses will not be adversely affected due to the new rule as the government has exempted jewellers with an annual turnover of up to Rs 40 lakh. While the medium business, Hundekari of Kearney, will have enough time to make the transition as no penalty will be levied till August.
Some supply-chain constraints might emerge as the industry scrambles to comply with the new norms given the limited number of Assaying and Marking Centres but the government will ramp up these centres going ahead, experts believe.