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What is GST on gold?

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GST on Gold
February 29, 2024

Table of Content

 

GST on gold is the goods and services tax payable by individuals while buying gold jewellery. Subsequently, they also need to pay GST on making charges. It is worth mentioning here that making, purchasing and import of gold jewellery have GST set at different rates. But one doesn’t need to pay taxes if new gold jewellery is being purchased by selling old ones or by proceeds of that sale. Thus, buying new jewellery in exchange for old ones is a profitable deal. 

Impact of GST on gold

Higher tax rates imposed under the GST structure have made gold much more expensive. Thus, affordability has reduced lowering demand for gold jewellery. Let us now delve deeper to understand the impact of gold GST at different stages.

  • Impact on import: With an increasing price of Gold it has resulted in reduced demand and has affected the liquidity of investment in this precious metal. 

  • Impact on Jewellery: GST on gold jewellery is levied at 5% on making charges. Usually, GST on these precious metal ornaments is charged as a fixed amount or a fixed percentage of the gold value. This translates to varying charges across jewellers and affects GST in turn. 

  • Impact on organised and unorganised sectors: The GST structure requires an organised dealing of gold with every transaction recorded to ensure accountability and transparency in the sector. With the price hike through GST, there’s a fear that it might boost smuggling and illegal export of gold. 

Comparison of gold prices before and after GST

The price of gold in any form includes the cost of extraction, processing and profit margin. The introduction of GST on these various stages from extraction to sales has significantly increased the price of gold jewelry.

Here's a table illustrating gold prices in pre and post-GST structure. 

Price components

Pre-GST rate

Post-GST rate

VAT addition

1%

Nil

Sales tax addition

1%

Nil

Customs duty 

10%

15%

Making charges

Nil

5%

GST on Gold value

Nil

3%

Currently, there’s 3% GST on gold jewellery, 5% on its making and 15% on import duty.

GST calculation on Gold

Typically, GST on gold purchase whether it is ornaments or bars, biscuits or coins, includes the cost of extraction, process and profit. Since making charges for jewellery is not there in the list, it is included separately in the overall price of the ornament. Till 2017, before the introduction of the GST structure, there were VAT and Service Taxes added to the price. GST has streamlined the tax structure, although imposing higher rates.

Example of GST calculation

Let us consider the following example to understand how GST calculation is done in the case of gold jewellery to arrive at the final price. 

Cost of gold: Rs 40,000 per 10 grams

Making charges: 10% of cost

So, what will be the price of 25 grams of raw gold in the pre and post-GST regime? The following table represents the comparison. The final price of the jewellery can be calculated based on the formula already shared.

Details

Pre-GST price (in Rs)

Post-GST price (In Rs)

Cost of 25 gm gold (A)

10000

10000

Customs duty at 10% (B)

1000

1000

Service tax on (price of gold + making charges)

110

Nil

GST at 3% on (gold price + making charges) (D)

NA

330

VAT at 1% on (A+B+C)

133.20

NA

Final price of 25 gm raw gold

11243.32

11330

GST Exemptions on Gold

The 31st GST Council meeting declared an exemption of GST on Gold. The announcement stated that no GST will be imposed on the supply from a notified agency to a registered jewellery exporter. This was a decision targeting less GST burden on gold jewellery exporters and an effort to make the Indian gold export sector more competitive in the global market. 

This exemption however benefitted only the exporters and not the domestic buyers who have to bear with 5% GST on making charges. 

E-way bill regulations for gold and its various forms

Since 13th September 2022, following respective state notifications, a separate window for generating e-way bills towards the transportation of gold, gold jewellery or precious stones has been introduced by the NIC. Before that, under CGST Rule 138(14), no e-way bill was required for the transportation of gold in its various forms. 

Input tax credit availability for GST on gold business

The gold jeweller or merchant is entitled to claim an Input Tax Credit (ITC) against spending on raw materials, i.e., gold and other related job work changes. The gold merchant can also claim ITC on taxes paid on a reverse charge basis for supply from an unregistered job worker. 

Things to consider before buying gold ornaments

Are you planning to purchase gold jewellery? Here are a few things that you need to keep in mind. 

  • Buy gold jewellery only if it’s hallmarked or BIS certified to ensure its purity.

  • The price of gold depends on its finesse. Low-quality gold is priced at a lower level and attracts a low rate of GST. Typically, 14, 18 and 22 carats gold is ideal for jewellery making. Despite being the finest category, 24-carat gold is not good for crafting ornaments. 

  • Remember that precious and semi-precious stones fitted in gold jewellery have different rates of GST imposed. Hence, they are separately mentioned on the purchase bill. 

  • The price of gold changes daily depending on factors like demand and supply, currency fluctuations, import duty and Indian jewellery market norms.  

FAQs about GST on gold

1. What is the GST rate on gold?

The GST rate on gold in India is 3% while the GST on making charges of gold jewellery is 5%. 

2. How can I buy gold without GST?

Buying gold without GST in India is illegal as this is a mandatory tax. Instead, you can choose to buy from a dealer who is authorised under the GST composition scheme and charges a lower rate.

3. Does gold have 12% GST?

No, the GST on gold is 3% and an additional 15% is payable as import duty. 

4. Can we get a GST refund on gold jewellery?

If the gold jewellery is exported or bought for export or manufacturing, one can claim a GST refund for it. 

5. How much is GST on hallmark gold?

GST on hallmark gold is 3% while there’s 5% on making charges.

6. How much is the GST on gold bar?

GST on gold bars is 3%.

7. How much is GST on digital gold?

GST on digital gold is 3% encompassing insurance premiums, trustee fees and storage charges.

8. What is the GST rate on gold-making charges?

The GST rate on gold-making charges is 5%, calculated over the price.

9. How much gold is tax-free for women in India?

As per CBDT circular, married women in India are allowed to hold 500 grams of while the amount is 250 grams for unmarried women.  

Summing it up

It’s not just GST, the price of gold has now skyrocketed because of several other external factors. However, understanding the GST rules and calculations is sure to keep you in a better place if you are planning to buy gold.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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