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 jewelry, 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 unorganized gold market and importing raw gold illegally because of the rise in gold rates.
Any tax on the supply of products, services, or both, excluding taxes on the supply of alcoholic beverages for human consumption, is referred to as a “goods and services tax.” The Indian government levies GST on both the manufacturing and the services of gold. When you buy gold jewelry, you must pay GST on the gold as well as the making charges. Gold is one of the few products that are subject to varying GST rates at various stages of its life cycle, from purchase to manufacturing. As a result, the GST on gold refers to both the availability of gold and the production of gold ornaments. However, if a person sells old gold and uses the money to buy new jewelry, he or she does not have to pay taxes. Another way to put it is that by simply buying new gold in exchange for old gold pieces, one can save on GST taxes.
To understand the impact on the 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|
GST on Gold Jewellery
If you want to purchase a 25-gram gold chain or jewellery, you will have to pay: Tax Price Before GST Price After GST Price of 25 gm of gold Rs. 100,000 Rs. 100,000 Customs Duty 10% Rs. 10,000 Rs. 10,000 Service Tax 1% Rs. 1,100 NIL GST 3% NIL Rs. 3,300 VAT 1.2% Rs. 1,333.20 NIL Making Charges (Above 10%) 10% Rs. 11,000 Rs. 11,000 GST on Making Charge 5% NIL Rs. 550 Total price of 25 gm Gold Jewellery Rs. 1,23,433.20 Rs. 1,24,850
Gold GST Rate on Gold Value
After the implementation of GST, a tax of 3% was levied on gold and gold-related jewelry 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% were 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 were 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 a 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 jewelry 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 that 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 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 jewelry.
Effects of GST on Gold
Presently, the organized 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.
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