GST on Gold
GST on Gold? The Goods and Services Tax affected the market of many commodities, including gold, and Gold Ornaments to a great extent.
Gold is one of the few commodities on which different GST rates are applicable at different levels from purchase to manufacturing.
GST on gold in different forms can discuss in detail. GST includes VAT, service tax, excise duty, and many other indirect taxes levied on domestic transactions.
Making charges on gold jewelry taxed under GST. On the other hand, basic customs duty continues to be levied on the import of gold from other countries and the recovery of IGST.
Consequently, the GST on gold is applicable to both the supply of precious metal and the manufacture of gold jewelry. Individuals who want to buy gold must find out in detail about the GST rates of gold and their implications.
Gold Rates Pre and Post GST regime
| Particulars | Pre-GST | Post-GST |
|---|---|---|
| VAT | 1% | Nil |
| Sales tax | 1% | Nil |
| Gold making charges | Nil | 5% |
| Import duty | 10% | 10% |
| GST Rate (Gold value) | Nil | 3% |
Gold Rate After GST
Consider this example to understand the impact on gold prices after the implementation of GST. Suppose the rate of 24K 10 grams of gold is ₹ 45,000 and there is an import duty of 10% on gold. Apart from this, the making charge 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 |
Impact of GST on Gold
After the implementation of the GST rate on gold, the precious metal has become costlier by at least 0.75%. This has directly reduced the demand for gold in general.
Keeping this information in mind, let us move on to find out the immediate impact of GST on gold at various levels.
Influence on gold import
The rising price of gold has reduced its demand and also affected the liquidity of investments in this precious metal. Regardless, benefits such as free trade agreements with countries such as South Korea have enabled GST registered importers to ship gold without paying an additional 10% customs duty.
Influence on ornaments
The GST levied on gold jewellery 2020 is 5% on the making charge. Generally, GST on golds jewellery is either in the form of a fixed duty or as a fixed percentage on the value of golds. This is why often, making charges vary among jewelers and affect the GST on golds coins and jewellery.
Influence on organized and unorganized sector
The GST system requires golds dealers to maintain a record of every transaction. This is expected to improve accountability and transparency between the two sectors of the sector. Notably, only 30% of this sector can be classified as organized. As a result, it is feared that higher rates may convince sellers to smuggle gold or sell the precious metal without a proper bill.
GST Calculation on Gold
It should be noted that a standard invoicing pattern is not followed in this area, leading to different billing systems among jewelers. However, every city has a jewellery association that announces the gold rate every morning.
Usually, the final price of jewelleryis calculated with this basic formula –
Price of golds X Weight in grams + Making charges + GST applied at 3% on the (price of jewellery+ making charges)
GST on Gold Exemptions
GST exemption was announced on the supply of golds made by a notified agency to registered jewellery exporters in the 31st GST Council meeting. The aim of such relaxation is to reduce the GST burden of gold jewellery exporters and make the Indian golds export sector more competitive in the international market.
A sharp 5% charge on making charge; Registered jewellers can claim an input tax credit of 2% on such expenses. However, the said exemption is directed to provide relief to gold jewellery exporters; This will not benefit the home buyers.
Things to Consider Before Buying Gold Ornaments
Investors who want to buy gold should keep a few things in mind. Some pointers are given below –
- They should buy only hallmarked gold jewellery, or it should be BIS certified to be sure about its purity.
- The price of gold is based on its finesse. The inferior quality of golds usually comes at a relatively lower per gram price and also attracts less GST. Although 24 karat gold is the highest quality, it is not suitable for making jewellery. 22 karat, 18 karat and 14 karat gold are commonly used in making jewellery.
- They should buy only hallmarked gold jewellery, or it should be BIS certified to be sure about its purity.
- The price of gold is based on its finesse. The inferior quality of golds usually comes at a relatively lower per gram price and also attracts less GST. Although 24 karat gold is the highest quality, it is not suitable for making jewellery. 22 karat, 18 karat and 14 karat gold are commonly used in making jewellery.
- It should be noted that precious and semi-precious stones in jewellery are taxed separately under the GST regime. That is why they should be displayed separately on the purchase bill.
- The price of gold changes daily and is influenced by a number of factors, including its demand and supply, import duties, currency fluctuations and the norms of the Indian jewellery market. Such factors and their impact significantly affect the GST rate of golds on transactions.
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