PM to Launch Gold Related Schemes on 5th November, 2015

PM to Launch Gold Related Schemes on 5th November, 2015 
The Prime Minister Shri Narendra Modi will launch the four mega Gold related Schemes i.e. Gold Monetisation Scheme (GMS), Gold Sovereign Bond Scheme, Gold Coin Scheme and the Gold Bullion Scheme on Thursday, 5th November, 2015 in the national capital.
The salient features of each of the aforesaid scheme are as follows:

Gold Monetisation Scheme (GMS), 2015
The GMS will replace the existing Gold Deposit Scheme, 1999. However, the deposits outstanding under the Gold Deposit Scheme will be allowed to run till maturity unless the depositors prematurely withdraw them.
 Resident Indians (Individuals, HUF, Trusts including Mutual Funds/Exchange Traded Funds registered under SEBI (Mutual Fund) Regulations and Companies) can make deposits under the scheme. The minimum deposit at any one time shall be raw gold (bars, coins, jewellery excluding stones and other metals) equivalent to 30 grams of gold of 995 fineness. There is no maximum limit for deposit under the scheme.
 The gold will be accepted at the Collection and Purity Testing Centres (CPTC) certified by Bureau of Indian Standards (BIS) and notified by the Central Government under the Scheme. The deposit certificates will be issued by banks in equivalence of 995 fineness of gold. The principal and interest of the deposit under the scheme will be denominated in gold. The designated banks will accept gold deposits under the Short Term (1-3 years) Bank Deposit (STBD) as well as Medium (5-7 years) and Long (12-15 years) Term Government Deposit Schemes. While the former will be accepted by banks on their own account, the latter will be on behalf of the Government of India. There will be provision for premature withdrawal subject to a minimum lock-in period and penalty to be determined by individual banks.
Interest on deposits under the scheme will start accruing from the date of conversion of gold deposited into tradable gold bars after refinement or 30 days after the receipt of gold at the CPTC or the bank’s designated branch, as the case may be and whichever is earlier. During the period from the date of receipt of gold by the CPTC or the designated branch, as the case may be, to the date on which interest starts accruing in the deposit, the gold accepted by the CPTC or the designated branch of the bank shall be treated as an item in safe custody held by the designated bank.
The Short Term Bank Deposits will attract applicable Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). However, the stock of gold held by the banks will count towards the general SLR requirement. The opening of Gold Deposit Accounts will be subject to the same rules with regard to customer identification as are applicable to any other deposit account.
The designated banks may sell or lend the gold accepted under STBD to MMTC for minting India Gold Coins (IGC) and to jewellers, or sell it to other designated banks participating in GMS. The gold deposited under MLTGD will be auctioned by MMTC or any other agency authorised by the Central Government and the sale proceeds credited to the Central Government’s account with the Reserve Bank of India. The entities participating in the auction may include the Reserve Bank, MMTC, banks and any other entities notified by the Central Government. Banks may utilise the gold purchased in the auction for purposes indicated above. Designated banks should put in place a suitable risk management mechanism, including appropriate limits, to manage the risk arising from gold price movements in respect of their net exposure to gold. For this purpose, they have been allowed to access the international exchanges, London Bullion Market Association or make use of over-the-counter contracts to hedge exposures to bullion prices subject to the guidelines issued by the Reserve Bank.
Complaints against designated banks regarding any discrepancy in issuance of receipts and deposit certificates, redemption of deposits, payment of interest will be handled first by the bank’s grievance redress process and then by the Reserve Bank’s Banking Ombudsman.
It may be recalled that the Government of India announced the Gold Monetisation Scheme vide its Office Memorandum F.No.20/6/2015-FT dated September 15, 2015. The objective of the Scheme is to mobilise gold held by households and institutions of the country and facilitate its use for productive purposes, and in the long run, to reduce country’s reliance on the import of gold..
 The list of CPTCs and Refiners is under finalization and will be notified by Central Government soon. Indian Banks Association is finalizing the necessary documentation including the tripartite agreements to be entered into by the designated banks, CPTCs and the Refiners under the Scheme. Banks are also putting in place the requisite systems and procedures to implement the scheme.
Sovereign Gold Bond Scheme
The Reserve Bank of India, in consultation with Government of India, has decided to issue Sovereign Gold Bonds. Applications for the bond will be accepted from November 05, 2015 to November 20, 2015. The Bonds will be issued on November 26, 2015. The Bonds will be sold through banks and designated post offices as may be notified. The borrowing through issuance of the Bond will form part of market borrowing programme of the Government of India. It may be recalled that the Union Finance Minister had announced in Union Budget 2015-16 about developing a financial asset, Sovereign Gold Bond, as an alternative to purchasing metal gold.
Sovereign Gold Bond will be issued by Reserve Bank India on behalf of the Government of India. The Bonds will be restricted for sale to resident Indian entities including individuals, HUFs, trusts, Universities, charitable institutions. The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram. The tenor of the Bond will be for a period of 8 years with exit option from 5th year to be exercised on the interest payment dates. Minimum permissible investment will be 2 units (i.e. 2 grams of gold).The maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March). A self-declaration to this effect will be obtained.
In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only. The Bonds will be issued in tranches. Each tranche will be kept open for a period to be notified. The issuance date will also be specified in the notification. Price of Bond will be fixed in Indian Rupees on the basis of the previous week’s (Monday–Friday) simple average of closing price of gold of  999 purity published by the India Bullion and Jewellers Association Ltd. (IBJA).  Payment for the Bonds will be through electronic funds transfer/cash payment/ cheque/ demand draft. The investors will be issued a Stock/Holding Certificate.
 The Bonds are eligible for conversion into de-mat form. The redemption price will be in Indian Rupees based on previous week’s (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA. Bonds will be sold through banks and designated Post Offices, as may be notified, either directly or through agents. The investors will be compensated at a fixed rate of 2.75 per cent per annum payable semi-annually on the initial value of investment.
Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time. Know-your-customer (KYC) norms will be the same as that for purchase of physical gold. KYC documents such as Voter ID, Aadhaar Card/PAN or TAN /Passport will be required. The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961) and the capital gains tax shall also remain same as in the case of physical gold. Bonds will be tradable on exchanges/NDS-OM from a date to be notified by RBI. The Bonds will be eligible for Statutory Liquidity Ratio(SLR). Commission for distribution shall be paid at the rate of 1% of the subscription amount.
Gold Coin/Bullion Scheme
The Indian gold coin is a part of the Gold Monetisation Programme. The coin will be the first  ever national gold coin and will have the National Emblem of Ashok Chakra engraved  on one side . Initially the coins will be available in denominations of 5 and 10 grams. A 20 gram bar/bullion will also be available. Initially, 15,000 coins of 5gm, 20,000 coins of 10 gm and 3,750 Gold bullions will be made available through MMTC outlets. The Indian Gold coin is unique in many aspects and will carry advanced anti-counterfeit features and tamper proof packaging that will aid easy re-cycling.
The Indian Cold coin will be of 24 karat purity & 999 fineness. All coins will be hallmarked as per the BIS standards. These coins will be distributed through designated & recognised MMTC outlets.
Among others Special Investigation Team (SIT) calls for greater vigilance by law enforcement and intelligence agencies while examining the cases of persons holding Directorship in more than 20 Companies and where more than 20 companies are operating from the same address 
The Special Investigation Team (SIT) in its Third Report had observed the following with respect to Shell Companies and Beneficial Ownership:

“Shell Companies and beneficial ownership (Reference p. 73-76 of the Third SIT Report)

The Report of the Committee headed by Chairman, CBDT on “Measures to tackle Black Money in India and Abroad” submitted in 2012 observed as follows:

“3.4 The primary method of generation of black money remains suppression of receipts and inflation of expenditure. The suppression could be over a range of
businesses and industrial activities which are  covered by what may be called ‘primary’ enactments to regulate sale receipts, actual production, charging  amount in excess of statutory amounts, etc. …..

3.6 However, as manipulation of income is not always possible by suppression of receipts, tax-payers may try to inflate expenses by obtaining bogus or inflated invoices from ‘bill masters’, who make bogus vouchers and charge nominal commission. As these persons are of very modest means, upon investigation, they tend to leave the business and migrate from the city where they operate. This is one of the reasons for a proportion of income tax arrears attributed to ‘assessee not traceable’.

3.7 Similarly, there are other categories of small ‘entry operators’, who provide accommodation entries by accepting cash in lieu of cheque/ demand draft given as loans/advances/share capital, etc and  thereby launder large sums of money at miniscule commissions. Due to frequent migration, such entry operators escape prosecution under the Income Tax Act. The appellate tax bodies also tend to tax their income at nominal rates. There is no effective deterrence, except for taxing commission on such bogus receipts and tax in the hands of beneficiaries. Providing fake bills and entries need to be dealt with strongly and as criminal offence under the tax laws.”

Use of shell companies to provide accommodation entries to launder black money has been observed in a number of high profile cases investigated or under investigation in the recent past.

The strategy to curb this menace has to be twofold:

(i)      Proactive detection of creation of shell companies: This would involve intelligence gathering through regular data mining and dissemination of information gathered to various law enforcement agencies for active surveillance.
(ii)    Deterrent penal action against persons involved in creation of shell companies and providing accommodation entries.

The following recommendations are made in this regard:

(i)      Proactive detection of creation of shell companies: Serious Frauds investigation office (SFIO) under Ministry of Company needs to actively and regularly mine the MCA 21 database for certain red flag indicators. These red flag indicators could be based on common DIN numbers in multiple companies, companies with same address, same contact numbers, use of only mobile numbers, sudden and unexpected change in turnover declared in returns etc. These indicators are illustrative in nature and the SFIO office can prepare a set of indicators based on its own experience and consultation with other law enforcement agencies like CBDT, ED and FIU.
(ii)    Sharing of information on such high risk companies with law enforcement agencies: Once certain companies are identified through data mining above, the list of such high risk companies should be shared with CBDT and FIU for closer surveillance.
(iii)   In case after investigation/assessment by CBDT, a case of creating accommodation entries is clearly established, the matter should be referred to SFIO to proceed under relevant sections of IPC for fraud. SFIO should also refer the matter to Enforcement Directorate for taking action under PMLA for all such cases of money laundering.
(iv)  It has also been observed that in many cases of creation of shell companies, the shareholders or directors of such Companies are persons of limited financial means like drivers, cooks or other employees of main persons who intend to launder black money. Section 89(1) and 89(2) of the Companies Act, 2013 provides for persons to declare if they have “beneficial interest” in the shares of the Company or not. Section 89(4) enjoins the Central Government to make rules to provide for the manner of holding and disclosing beneficial interest and beneficial ownership under this section. The Ministry of Company Affairs may frame such rules at the earliest.”

The SIT had requested Ministry of Corporate Affairs to provide the following data:

            i)          Persons who held Directorship in more than one Company
            ii)         Companies who have the same office address

The data was subsequently provided by the Ministry of Corporate Affairs.  From a perusal of data given by the Ministry of Corporate, the following points stand out:

(i)      There are 2627 persons holding Directorship in more than 20 Companies in violation of Section 165 of the Companies Act, 2013.  It may be mentioned this is also in violation of s. 275 of the erstwhile Companies Act, 1956.  The total number of Companies involved is 77696.
(ii)    A total of 345 addresses have at least 20 Companies operating from the same address.  The total number of Companies sharing their address with at least 19 more Companies are 13581 in number.  While there is no specific Act/Rule which debars Companies from having the same address, SIT has desired greater vigilance is accorded by law enforcement and intelligence agencies like CBDT, CBEC, ED and FIU while examining the operations of such Companies.

The SIT has requested Ministry of Company affairs to take necessary action with respect to violation of the Companies Act noted above. The SIT has further requested CBDT, CBEC and Enforcement Directorate to undertake due diligence on the Companies data referred to above.

Designated Post offices to issue 
Sovereign Gold Bond 2015-16 
In continuation of the Press Communiqué dated 30th October, 2015 on Sovereign Gold Bond 2015-16, the Government of India, in consultation with Department of Post, has decided to issue the list of designated Post Offices to issue Sovereign Gold Bond Scheme, 2015. The designated Post Offices are authorized to receive the applications either directly or through agents.

The other terms and conditions will remain same as in the press communiqué dated 30th October, 2015. 

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