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GST on Gold

Comparison of Gold Rates before and after GST

Last Updated 31st Oct 2020

GST on gold is applicable to both the supply of the good i.e. gold and also on the service i.e. manufacture of the gold jewellery by the jeweller.

Before GST After GST
GST Rate on Gold Value NIL 3%
Sales Tax on Gold Value 1% NIL
VAT on Gold Value 1% NIL
Import Duty on Gold 10% 10%
Gold Making Charges NIL 5%

What is GST on Gold?

With the implementation of GST, there was a large-scale impact on most of the goods and services, primarily affecting the price of the commodities. Gold is one of such products whose price got affected by the new taxation regime. The impact was noticed at different levels; gold value, making of gold jewellery and imports of gold. While, it was assumed that the introduction of GST will bring transparency and accountability in the gold sector, however contrary to the expectations, vendors are shifting to the unorganised gold market and importing raw gold illegally because of the rise in gold rates.

Gold Rate After GST

To understand the impact on gold rate after the implementation of GST, consider this example. Suppose the gold rate of 24K 10 gms gold is ₹ 45,000 and the import duty of 10% is charged on gold. Further, the making charges of gold is ₹ 3,000, the price of gold before and after GST will be as follows.

Taxes on Gold Before GST After GST
Price of 10 gm gold ₹ 45,000 ₹ 45,000
Customs Duty (10%) ₹ 4,500 ₹ 4,500
Service Tax +VAT(2%) ₹ 990 NIL
GST on Gold (3%) NIL ₹ 1,485
Total value of gold ₹ 50,490 ₹ 50,985
Making charges ₹ 3,000 ₹ 3,000
GST on making charges (5%) NIL ₹ 150
Total Price of Jewelry ₹ 53,490 ₹ 54,135

Gold GST Rate on Gold Value

After the implementation of GST, a tax of 3% was levied on gold and gold-related jewellery above the price of the gold. This cost was passed to the final consumers when they purchased the gold ornaments. Before the GST, a service tax of 1% and VAT of 1% was charged on the price of the gold, thus increasing the gold rates.

GST on Gold Ornaments

In India, most of the raw gold is imported from overseas, which is then used for making gold ornaments. While previous to the implementation of GST, there were no making charges on the gold. However, a GST of 18% was levied on the making charges of gold as goods and services tax was implemented in India. This was eventually reduced to 5% due to rising concerns and protests. Presently, the consumer has to bear 3% GST on gold value, 5% GST on making charges.

Revised Tax Rates on Gold Jewelry under GST

Before the implementation of GST, a service tax and VAT (Value Added Tax) of 1% each was levied on gold. Thus, an extra 2% was charged on the selling price of the gold to the consumers. Gold became more expensive when the GST of 3% was fixed on the gold. However, there was relief as gold making charges were reduced to 5% as against to 18% before the implementation of GST. In India, as most of the gold is imported from outside to make jewellery and the import duty of 10% is charged on the import of gold, thus gold imports became more expensive after the GST.

Exemption of GST on gold

Under the scheme for ‘export against supply by the nominated agency,’ the government issued a list of notified public and private sector banks which were exempted from paying GST on imports of gold, thus bringing a huge relief to the notified agencies. However, there was no effect on the gold rates for the gold vendors with the decision taken after the 31st GST Council meeting on 22nd December 2018.

Buying Gold Jewelry: Key Factors to Keep in Mind

The precious yellow metal is considered as auspicious in India. It not only has ornamental value but is also a significant option for investments. Here are a few things that you must keep in mind while buying gold jewellery.

  • Check the purity of gold: The most considerate factor while buying the gold is to check the purity of gold. The purity of gold can be determined using hallmarking, which is accredited by the accrediting agency ‘The Bureau of Indian Standards’ (BIS). The hallmark jewellery will have a number attached to it along with a BIS stamp on it. You can look for the letter K along with the number on the jewellery. 24K gold is called pure gold or 100 percent gold.
  • Cross-check the gold price: The cost of the jewellery is based on the weight and the purity of gold. For instance, the price of 22 carat gold of 10 gm will be higher than 18 carat gold of the same weight. The price of gold changes every day with the change in gold rate. It will help if you cross-verify the gold rates before buying the gold.
  • GST rate on gold: The GST rate of any precious/semi-precious stones on the gold jewellery is different from gold. You must ensure that these charges are separately mentioned in the bill. Under the GST, a tax of 3% on gold value and 5% making charges are levied on the gold jewellery. The sellers may also include labour charges in the form of making charges. You must thus negotiate with jewellers to reduce this cost.

Effects of GST on Gold

Presently, the organised gold sector in India comprises 30%; however, it is believed the high rates of gold will shift the vendors to move to the illegal gold sector and import gold illegally. Further, the gold industry has been affected in the following manner with the implementation of GST.

  • Impact of GST on gold value: GST has soared the gold prices for the final consumers. It is because earlier 2% tax (1% service tax and 1% VAT) was charged on the gold. However, the GST tax slab rate for gold value is 3%.
  • Impact of GST on gold imports: With the implementation of GST, the illegal smuggling of gold imports have significantly increased especially from the middle east. It is because the import or custom duty of 10% is levied on the gold prices along with the GST of 3%, thus hiking the custom duty on gold imports.

FAQs

What is the GST rate on gold in India?

In India, a GST of 3% is charged by the seller when consumers purchase the gold. Further, 5% of the price of the making charges is charged as GST making charges. Sellers may also have to pay an import duty of 10% for importing gold from overseas.

How is GST calculated on gold Jewellery?

If the gold is imported from outside, the vendors will pay a custom duty of 10% on the gold value. Additionally, 3% of GST is charged on the gold value. If the gold is used to make ornaments, 5% GST is levied on making charges of the gold. Thus, the value of jewellery is equal to the value of gold plus custom duty plus GST plus making charges and GST on making charges.

Can I claim GST on gold?

A total of 5% GST is levied on making charges of jewellery, and if you are a registered jeweller, you can claim an input tax credit of 2% on making charges of the jewellery.

What is the percentage of GST on gold?

A total of 3% GST is levied on gold value. If the gold is converted into ornaments, 5% GST is also charged on the making charges of the gold ornaments. Thus, a total of 8% of GST on jewellery is levied on gold ornaments.

Is gold tax-free?

No, you have to pay GST of 8% on the purchase of gold. Also, if you have invested in gold, you have to pay tax depending on how long you have held the gold coins/jewellery. For short term capital gains, you have to pay income tax as per your tax slab rate, and you have to pay 20% tax along with surcharge if any on long term capital gains on the gold.


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