GST on Gold
Gold especially gold ornaments are one of the very few items that feature GST applicability many times and too at the different rates. GST rate on gold is 3% while in the case of gold Jewelry, an additional 5% GST is applicable on the making charges of gold ornaments. GST applies to both the supply of the good that is gold and the service which is given by the manufacturer of gold jewelry.
GST on Gold imports
Gold is mainly imported and while GST applies to gold imports made from one state to another via IGST or Interstate GST at 3% and international imports are not subject to GST.
If a GST registered business or individual does the gold importing from outside India, in that case, instead of making GST payment on gold, custom duty at the rate of 10% payable on gold imports made in the form of semi-finished /raw gold as well as gold bars. The cost is passed on to the end-user and GST is chargeable on the top of any customs duty that may have been paid by the importer of gold.
Revised Tax Rates on Gold Jewelry under GST
Following taxes/tariffs apply to gold jewelry if such jewelry is manufactured using gold imported from overseas:
- 10% Customs Duty on gold being imported from overseas
- 3% GST on the value of gold in the jewelry
- 5% GST on making charges of the gold jewelry
5% of GST applies to Making charges of gold Jewelry. Making charges on Gold Jewelry applies either in the form of a fixed percentage on the value of gold or a fixed charge.
However, making charges of every jeweler is different which impacted the GST on gold jewelry being purchased.
Current GST on Gold Exemption
During the 31ST GST council meeting, which was held on December 2018, the concept of GST exemption introduced in case the supply of gold was being made by a notified agency to GST registered exporters of gold jewelry.
It helps in reducing the burden of the GST on Indian Gold Jewelry exporters. It possibly makes Indian Gold exports more competitive in the global marketplace, domestic gold jewelry buyers will be affected by this new GST exemption.
Factors to keep in mind at the time of buying a gold jewelry
- To ensure the purity of gold, always purchase a hallmarked or BIS certified jewelry.
- The cost of the gold varies based on gold fineness. 24 Karat is the highest quality of gold but not good at making jewelry. Usually to make jewelry, 22 KT, 18 KT or 14 KT is being preferred. Lower is the quality of gold, lower per gram price and lower GST on gold would be applied.
- Make sure that the value of any semi-precious stones or precious stones in the jewelry is featured separately on the bill. These may have different tax treatment under GST.
Gold rate i.e. price of gold changes daily depending on a variety of factors and this can change the GST on gold jewelry applicable to your transaction (usually marginally).
Comparison of Jewelry prices before and after implementation of GST
| Serial No. | Cost and Taxes on Gold | Before GST implementation | After GST implementation |
| A | Price of 10gm Gold
| 39660
| 39660
|
| B | Custom duty (10%)
| 3966 | 3966
|
| C | A+B
| 43626
| 43626
|
| D | Service tax(1%)
| 436.26
| 0(N/A)
|
| E | C+D
| 44062.26
| 43626
|
| F | VAT (1%)
| 440.62 | 0/NA
|
| G | E+F
| 44502.88 | 43626 |
| H | GST on gold (3%)
| 0(N/A) | 1308.78 |
| I | G+H
| 44502.88
| 42317.22 |
| J | Making charges (12% of Gold price+ customs)
| 5340 | 5078 |
| K | I+J
| 49842
| 47395 |
| L | GST on making charges (5%)
| N/A
| 2369.75
|
| M | Total price of Jewelry | 49842
| 50304
|
Note: We have assumed making charges of 12%. This can fluctuate from one jeweler to another.
GST impact on Gold
From the Buyer’s perspective
Before GST implementation on gold at 3%, the effective tax rate on the value of a good was 2% (1% VAT + 1% Service tax), thus after the GST implementation on gold at 3% bring an increase in the price of gold on the marginal basis for gold buyers. So, an effective increase in the cost of gold is estimated at 2%, as shown in the table above.
An increase in the price of gold jewelry us in line with efforts to reduce India’s gold imports and lower the country’s current account deficits.
This is because we are a net importer of this precious metal and most of the gold imported is used in jewelry making.
From Seller’s perspective
- India’s gold market is largely unorganized, with the organized sector accounted for a relatively smaller portion of the market.
- Even the transparency has increased with the implementation of GST on gold, but it works as an advantage only for the organized sector.
- As a result, some industry experts believe that smaller jewelers may move into the unorganized sector to avoid paying and charging GST on gold sales.
