CLARIFICATION ON APPLICABILITY OF PMLA ON JEWELLERS BY DIRECTORATE GENERAL OF AUDIT INDIRECT TAXES & CUSTOMS CONVEYED BY MR. SAIYAM MEHRA, CHAIRMAN OF GJC

27th March 2023

Important Points Clarified Regarding the Applicability of PMLA on Jewellers by the Directorate General of Audit Indirect Taxes & Customs, as Conveyed by Saiyam Mehra, Chairman of GJC: Clarification on Applicability, Dates, Cash Transactions, Client Due Diligence, and Registration Requirements for Dealers in Precious Metals and Precious Stones.

Dear Jewellers,

Considering the recent updated guidelines on Anti-Money Laundering (AML) Standards and Combating the Financing of Terrorism (CFT) issued by the government on 17.02.2023 for Dealers in Precious Metals & Precious Stones, there has been a lot of confusion and panic amongst the jewellers as regards the applicability of PMLA on jewellers. GJC with its legal team, on 24th March 2023 had approached the Directorate General of Audit Indirect Taxes & Customs, who is the regulator for PMLA for Dealers in Precious Metals & Precious Stones, and got clarification on the below mentioned points-

1. Is the PMLA applicable to jewellery manufacturers, wholesalers & retailers who sell jewellery to retail customers or only to bullion dealers?

Reply: – Yes, PMLA is applicable to jewellery manufacturers, wholesalers & retailers who sell jewellery to retail customers.

2. If the answer to the above question is in affirmative, from which date is the PMLA applicable?

Reply: – As per Directorate General of Audit Indirect Taxes & Customs, the said Act is applicable from date of publication of revised guidelines i.e. 17th Feb 2023.

3. As per the Notification dated 28th December 2020, does it mean that dealers in precious metals, precious stones, if they do not engage in transactions in cash above Rs. 10 lakhs, they will not be treated as Reporting Entities?

Reply: – Yes, if dealers in precious metals and/or precious stones, do not engage in cash transactions above Rs. 10 lakhs, they will not be treated as Reporting Entities.

4. Are the jewellers supposed to register with the FIU as reporting entities even if they do not engage in transactions in cash above Rs. 10 lakhs?

Reply: – If jewellers do not engage in cash transactions above Rs. 10 lakhs, they need not register with the FIU.

5. The limit of Rs. 10 lakhs & limit of Client Due Diligence of Rs. 50000 is applicable to Reporting Entities from the year 2013. As dealers in precious metals, precious stones have been notified as Reporting entities, does it mean that they have to follow Client due Diligence irrespective of whether they engage in cash transactions above Rs. 10 lakhs?

Reply: – If dealer of precious metals engages in cash transactions above Rs. 10 lakhs then only they will be considered as reporting entity. If jeweller is not a reporting entity then the limit of Rs. 50,000 for Client due diligence is not required.

GJC has requested to increase the limit of Rs. 50,000 to Rs. 2 lakhs which is in line with the limit as prescribed under the Income Tax Act.

From GJC, we request jewellers not to get panicked with the rumours about new KYC limit of Rs.50,000. Our legal team is in touch with the highest authorities and shall keep you updated with the latest changes.

Please consult your legal advisor and take decision accordingly.

Best Regards,

Saiyam Mehra

Chairman – GJC (All India Gem & Jewellery Domestic Council).