WHO WILL REGULATE THE ENSUING GOLD (PRECIOUS METAL) CONTROL ACT- THE CBDT OR THE STILL BORN CBIT OR THE RBI?

[jayaprakash gopinathan]

The Hon’ble Prime minister declared that the demonetisation is only the beginning   to end the menace of the black money. In such a scenario one can anticipate the reintroduction of the Gold Control Act, enacted in 1962  and repealed in 1990. This time it may not be restricted to Gold alone. Other precious metals used also for ornaments and to hoard as an asset may also be brought under the control to be introduced. The possibility of taking out a leaf from the Budget introduced by Dr. Manmohan Singh in 1994 for the introduction of Service Tax without much debate by camouflaging it as Chapter V of the Finance Bill, 1994 cannot be ruled out considering the lack of majority in the upper house for the ruling party. If so it will be another surgical strike against black money.

After the introduction Gold Control Act, 1962 series of measures were introduced to check hoarding of Gold and Gold Control Act, 1968 prohibited possession of gold in primary forms (bars & coins) by individuals and restricted possession of gold jewellery. Persons were required to declare the gold jewellery in their possession if it exceeded more than two kilograms. The period between 1968 and 1990 was highly regulated for gold business but only paved way for a black market for Gold. When the Gold Control introduced in 1939 by the President Franklin Roosevelt of United States of America was a success due to the harsh penalty of $ 10, 000/- or 10 years in jail the Indian control failed for the lack of deterrence in penal provisions and in its enforcement. This time the Central Excise Duty introduced for gold jewellery will definitely have an impact in the regulation if introduced.

The de licensing of jewellery enabled the spurt in gold shops and removal of restriction of import of gold bars on payment of concessional rate of duty made the Karipur Airport in Kerala to record the highest import of gold bars. What happened to these gold bars is not recorded afterwards. So there may be an attempt to trace it by making mandatory declaration of gold and other precious metal bars and jewellery above a certain quantity. As happened in 1939 in U.S, the Government may resort mandatory purchase of the Gold using the cash now with the Banks.  This paper only discusses who will be the Regulator in such a scenario.

The introduction of Service Tax in 1994 saw the tussle between the CBE&C and CBDT for its enforcement and in spite majority of the law makers were in favour of CBDT, the then Chairman of CBE&C, Shri.S.A. Govinda Raj was able to persuade and win over the then political executive and retain it for the CBE&C.  One can only guess which apex Board under the department of Revenue will be in charge, if the Finance Act, 2017 incorporate a chapter to control the possession of precious metals including gold or whether the Apex Bank of the nation will be entrusted the task of regulation. 

All the contenders, CBDT, CBE&C (CBIT) & RBI have equal chance of being the Regulator considering the present scenario of introduction of duty on manufacture of Gold, Income declaration scheme and demonetisation exercise. Whoever be the custodian, the Nation expects them to fulfil the confidence to be reposed on them.