Legal and Regulatory Compliance in respect of a Single Jewellery Sale of ₹4.5 Lakhs Paid via NRE Account
I. Statement of Facts
A jeweller registered in India has made a sale of gold jewellery worth ₹4,50,000 (Rupees Four Lakhs Fifty Thousand only) to a buyer, who remitted payment through an NRE (Non-Resident External) account via banking channels. This transaction is one of multiple transactions made by the same buyer, i.e., part of an aggregate of multiple jewellery purchases.
The jeweller is duly registered under the GST regime, and GST was charged and invoiced on the transaction.
II. Legal Issues Involved
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Whether multiple purchases aggregating to a higher amount attract any restriction under Section 269ST of the Income Tax Act, 1961, despite individual payments being below the threshold.
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Whether the jeweller must comply with any reporting or KYC obligations under PMLA, owing to aggregate transaction value.
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Whether payments from the buyer’s NRE account for multiple transactions are compliant under FEMA and RBI Master Directions.
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Whether any additional compliance is triggered under GST law due to the buyer's NRI status or transaction structure.
III. Legal Analysis and Interpretation
1. Income Tax Act, 1961
Section 269ST – Mode of Undertaking High-Value Transactions
Text of Law:
“No person shall receive an amount of two lakh rupees or more in respect of a single transaction or in respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system…”
✅ Interpretation with Aggregation:
Where multiple transactions are made by the same buyer for the same event or occasion, e.g., bridal jewellery or marriage-related purchases, the aggregate amount is considered under Section 269ST.
CBDT Clarification (Circular No. 22/2017, dated 3.07.2017):
Even if the buyer makes multiple payments under ₹2 lakh each, if they are related to a single event/occasion, the threshold of ₹2 lakh applies on an aggregate basis.
✅ Application to Present Case:
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If each payment is made via bank transfer (such as NEFT from NRE account), Section 269ST is not violated.
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No cash transaction is involved, and hence no prohibition applies under Section 269ST, even when transactions are aggregated.
✅ Conclusion:
✔ The total value is irrelevant under Section 269ST if all payments are through permitted banking modes (which includes NRE accounts via NEFT/RTGS/etc.).
2. Goods and Services Tax Act, 2017
Sections 9, 22, 31 – Levy, Registration & Invoicing
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The jeweller is liable to collect 3% GST on gold jewellery and 5% on making charges, if separately charged.
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As transactions are not exports (goods delivered in India), these are taxable domestic supplies.
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The buyer being an NRI does not exempt the supply from GST unless it qualifies as an export under Section 2(5) (which requires physical movement outside India and foreign currency realisation).
✅ Conclusion:
✔ All transactions, irrespective of buyer's NRI status, are taxable under GST if goods are delivered in India. Each transaction must be properly invoiced, disclosed in GSTR-1, and reflected in GSTR-3B.
3. FEMA, 1999 & RBI Master Directions
Section 6 & Deposit Regulations under NRE Account Use
NRE accounts are intended to allow NRIs to freely repatriate and use foreign-earned funds. RBI permits use of NRE accounts for:
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Local payments in India in INR for personal purposes.
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Purchase of goods and services for personal consumption.
✅ Key RBI Circulars:
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Master Direction – RBI/FED/2015-16/7, updated regularly, permits use of NRE balances for legitimate transactions in India.
✅ Application to Case:
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Use of NRE funds for multiple purchases of jewellery for personal use is not restricted under FEMA.
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No prior permission or reporting is required by the seller.
✔ Jeweller must retain proof of payment (NEFT/RTGS receipt, UTR number) evidencing that the payment was from an NRE account.
4. Prevention of Money Laundering Act, 2002 (PMLA)
PMLA Coverage for Jewellers – Notification dated 28.12.2020
As per the Finance Ministry Notification S.O. 2036(E) dated 28.12.2020:
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Jewellers are covered as “reporting entities” under PMLA when engaged in:
“Cash transactions above ₹10 lakh in a single instance or in series of transactions integrally connected.”
✅ Application to Present Case:
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If all transactions are non-cash, and none exceed ₹10 lakh individually in cash, jeweller is not required to report.
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However, for transactions aggregating above ₹10 lakh, it is advisable to:
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Maintain KYC of buyer (passport, address proof).
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Document purpose of purchase if linked to any single event (e.g., wedding).
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✅ Conclusion:
✔ No PMLA reporting is triggered in this case if all payments are through bank (even cumulatively), but voluntary KYC is strongly advised.
IV. Legal Summary Table
| Law | Provision | Applicability (Aggregate Transactions) | Compliance Required |
|---|---|---|---|
| Income Tax Act, 1961 | Section 269ST | ✅ Not attracted if banking channel used even for multiple payments | Maintain UTR/NEFT proofs |
| GST Act, 2017 | Sec. 9, 22, 31 | ✅ GST applicable per transaction; aggregation not relevant | Invoice, GSTR-1 & 3B |
| FEMA & RBI | FEMA Sec. 6, RBI Directions | ✅ NRE account use allowed for lawful INR payments | Retain proof of remittance |
| PMLA, 2002 | MOF Notification & Sec. 2(1)(s), 12 | ✅ No mandatory reporting if no cash & below ₹10L per transaction | Voluntary KYC suggested |
Final Compliance Conclusion
In the present case, the sale of jewellery worth ₹4.5 lakh, even if part of multiple transactions aggregating to higher sums, is legally valid and compliant under Indian tax and foreign exchange laws provided:
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All payments are received via banking channels (including NRE accounts),
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GST is properly levied, invoiced, and filed,
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No single cash transaction exceeds ₹10 lakh, thus avoiding PMLA applicability,
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Documentation such as buyer identity (especially for NRIs), invoice, and payment trail is retained for audit and internal compliance.
✅ No contravention arises under Section 269ST, FEMA, GST Act, or PMLA.
