New Delhi, (The Telegraph): The Centre today made it mandatory for the buyer of any goods or service including gold jewellery to produce a PAN card for cash transactions worth more than Rs 2 lakh.

The move is seen as a relaxation of the Rs 1 lakh threshold that finance minister Arun Jaitley had proposed in his budget speech in February.

The decision to raise the threshold to Rs 2 lakh was taken after several representations from central and state legislators and trade associations who felt that a lower threshold would dent consumer spending at a time the Modi government is keen to crank up demand in an economy that is not showing signs of the robust growth that had been predicted last year when it assumed office.

The new rules will kick in from January 1.

"If you transact in cash for more than Rs 2 lakh, a PAN number will be necessary," Jaitley told legislators in Parliament.

PAN is an alphanumeric identity that taxpayers need to quote when they file their returns.

But the new rules will be a blow to buyers of jewellery who did not have to furnish their PAN cards for cash-based purchases worth less than Rs 5 lakh.

There was also no need to produce a PAN card for sale or purchase of other goods and services. It has been made mandatory for opening a demat account through which investors funnel money into stocks, mutual funds and bonds.

The move is designed to crack down on black money transactions in the country.

The biggest beneficiaries of the new rules are people who intend to park their money in post office deposits. They will no longer have to furnish PAN details when they make their deposits at post offices.

Earlier, the rules mandated that the PAN number had to be furnished for any cash deposit above Rs 50,000. The change is aimed at encouraging post office deposits that have steadily declined in the recent past.

PAN details will also not be required for buying property costing less than Rs 10 lakh as against the earlier reporting floor of Rs 5 lakh. Similarly, cash payment for foreign travel will not require PAN details if the spending is less than Rs 50,000, compared with a floor of Rs 25,000 earlier.

In the case of hotel or restaurant bills paid one time in cash, the floor has been raised from Rs 25,000 to Rs 50,000.

The government said PAN details would also not be needed for telephone or cellphone connections.

Cash cards or other pre-paid instruments such as purchased gift vouchers issued by departmental chains will similarly have a PAN reporting floor limit of Rs 50,000. There was no need to quote the PAN number while buying such cards or vouchers earlier.

However, what is worrying the market most is the impact of the decision to bring down the floor level for quoting PAN while purchasing jewellery. Said Rajiv Babbar, CEO of Rose Jewels: "Obviously, sales will fall. A large chunk of the money circulated in this market comes from farmers and non-working ladies who save money from household incomes . These people are not taxpayers."

Amit Bannerjee, an independent merchant banker, said: "This move will curb black money in the bullion market but it may also stifle sales to genuine people who are otherwise non-tax payers. We have to remember that Indians traditionally buy gold for occasions like weddings and religious functions."