Jewellers mull relaunch of gold purchase schemes

Jewellers, led by Titan Company, might relaunch gold purchase schemes soon.

Titan, which had discontinued the Golden Harvest and Swarna Nidhi jewellery purchase schemes for its brand Tanishq in July, is planning to relaunch these. A company spokesperson said these would be in compliance with the provisions of the Companies Act, 2013.

Gold purchase schemes have been a major source of working capital for jewellers.

Under such a scheme, a jeweller collects a certain amount of deposits as advance for a few months, while discounting instalments for a month or two.
At the end of the tenure, the depositor can buy jewellery worth the accumulated amount.

With the implementation of the Companies Act, 2013, on April 1 this year, gold purchase schemes came under the purview of public deposits.

This restricted the return companies could offer deposit holders to 12 per cent and that, too, for 12 months. It also capped the total amount of deposits at 25 per cent of a company’s net worth.

Subsequently, Titan suspended new enrolments under the scheme; other major jewellers followed.

“If other jewellers relaunch the scheme, we will also consider this by December. We might consider relaunching the gold purchase scheme by limiting it to 12 months,” said Suvankar Sen, executive director, Senco Gold & Diamonds.

Ashok Minawala of the All India Gems & Jewellery Trade Federation says advances taken by jewellers shouldn’t be considered deposits.

More, even if companies run the scheme in compliance with the provisions of the new Companies Act, the Reserve Bank of India might treat these as deposits.

Last week, the federation had made a representation to the Union corporate affairs ministry, seeking clarity on the law. Minawala said the federation has sought clarity on sections 73 and 76 of the Act, which dealt with deposits.

In their new version, gold purchase schemes’ monthly instalments will be treated as advance sales. On maturity, the money would be returned as jewellery, said an official from the sector.

Amid the September 15 deadline for advance income tax payments drawing close, an official said, “We are facing pressure from income tax officials to pay tax based on last year’s income, which, we all know, will be difficult to repeat this time.”