GST on Gold
Gold plays a crucial role in Indian culture and economy. It transcends its traditional appeal during festivals like Dhanteras. The taxation framework for gold in India significantly impacts its pricing, creation, selling, and importing process. For businesses and individual buyers, clarity on gold taxes can ensure informed purchases. Let’s explore the specifics of GST on gold across various aspects.
What is GST on Gold?
The Goods and Services Tax (GST) applies to the sale of gold in various forms such as bars, coins, and jewellery. Under the GST law, gold is classified as “goods,” and its supply is governed by Section 7 of the CGST Act. Both the material cost and associated services, such as making charges for jewellery are subjected to GST.
The introduction of GST replaced multiple indirect taxes like Valued Added Tax (VAT), excise duty, and service tax. It creates a more streamlined tax structure for the gold industry. With Indiagold, we make it easy for you to understand how GST impacts your gold. You can easily invest in digital gold on the app and leverage gold loans at an affordable rate.
Latest Update on Gold GST Rate
In the Union Budget 2024, significant changes were introduced to customs duties on gold imports. Effective from 23rd July 2024, the Central Board of Indirect Taxes and Customs (CBIC) notified a reduction in basic customs duty (BCD) on gold bars and dore (gold bars with mixtures of gold and precious metals). This made gold imports comparatively cheaper.
| Type of Duty | Gold Bar and Findings | Gold Dore | | ----- | :---: | :---: | | Basic Customs Duty (BCD) | 5% | 5% | | Agriculture Cess (AIDC) | 1% | 0.35% | | Total | 6% | 5.35% |
This reduction aims to balance gold prices domestically and reduce illegal imports while supporting the jewellery export sector.
What are Gold GST Rates?
| Particulars | HSN Code | GST Rate | | ----- | :---: | :---: | | Precious stones (except diamonds), semi-precious stones (worked/unworked) | 7103, 7104 | 0.25% | | Diamonds, gold, pearls, silver, jewellery articles | 7101, 7102, 7106, 7107, 7108, 7109, 7111, 7113, 7114, 7116, 7118 | 3% | | Job work (e.g., jewellery making, cutting diamonds) | 9988 | 5% | | Real zari thread (gold/silver with textile thread) | 5605 00 10 | 5% |
GST on Gold Making Charges and Purchase
Gold jewellery involves both material costs and labour (making charges). As clarified under Section 8 of the CGST Act, this is treated as a composite supply. The principal supply (gold) attracts a GST of 3% which also applies to the total value of jewellery, including making charges.
- GST on making charges of gold: When goldsmiths perform job work, the making charges attract 5% GST.
- Reverse charge mechanism (RCM): If the job worker is unregistered, the jeweller must pay 5% GST on making charges under RCM.
- Unregistered sellers: When individuals exchange or sell gold ornaments, GST is not applicable, as this falls outside the scope of business transactions.
What is the Gold GST Percentage for Coins and Jewellery?
The gold GST percentage depends on the type of gold product being purchased. The GST on gold coins is set at 3%, while the tax on gold jewellery, the same 3% GST rate applies. Plus, the making charges for jewellery attract 5% GST.
For example, a 22 carat gold GST rate on a gold bangle with a price of Rs. 1,00,000 and making charges of Rs. 5,000 would be Rs. 3,150 (3% of Rs. 1,00,000 for the gold and 5% of Rs. 5,000 for making charges).
GST on Digital Gold Purchase
Digital gold has become a popular investment option due to its convenience and security. When buying digital gold, a 3% tax on gold purchases is levied. Unlike physical gold, no further GST is levied during resale or redemption. This makes digital gold an attractive and cost-effective choice for investors. You can use this opportunity to buy digital gold through Indiagold. You can use the digital gold to convert them into gold coins, sell them for a profit, or even gift them to your friends. Indiagold’s app makes this whole process seamless.
GST on Hallmark Gold
Gold that is hallmarked is subjected to 3% GST on its value. However, it’s important to note that the hallmark charges on making attract a separate GST rate of 5%. This tax structure ensures the cost of both the gold and workmanship is covered under the Goods and Services Tax regime.
Tax on Gold Before and After GST
Gold pricing is influenced by multiple factors, including the cost of extraction, processing, and additional charges such as taxes. GST has significantly changed how taxes are levied on gold and gold jewellery.
| Particulars | Pre-GST | Post-GST | | ----- | :---: | :---: | | Value Added Tax (VAT) | 1% | 1% | | Sales Tax | 1% | Nil | | Gold Making Charges Tax | Nil | 5% | | Import Duty | 10% | 10% | | GST on Gold Value | Nil | 3% |
Key observations:
- Introduction of GST on gold value: Before GST, there was no specific tax on the value of gold. However, under GST, a 3% tax is levied on the value of gold, increasing the overall cost for consumers.
- Tax on making charges: Earlier, there was no gold tax rate for making charges. After GST, a 5% tax is applied to gold jewellery’s making charges, further adding to the price of the finished jewellery.
- Import duty: Import duty on gold remained unchanged at 10% before and after GST. This kept the cost of raw gold for imports stable.
Current Effective Gold Tax in India
- Pure gold: For pure gold, the combined GST and import duty account for 10.5% of the total price.
- Breakdown: 3% GST on gold value + 7.5% import duty
- Gold jewellery: For gold jewellery, the total tax burden includes:
- 3% GST on gold value
- 5% GST on making charges
- 10% import duty on raw gold
Impact of GST on Gold
The introduction of GST has significantly influenced gold prices and industry practices.
- Gold import: With GST and customs duties combined, the overall cost of imported gold increased. However, Free Trade Agreements (FTAs) with nations like South Korea allow GST-registered importers to reduce customs burdens.
- Ornaments: Variations in making charges among jewellers impact the final price for consumers. The GST system has improved transparency but also increased costs slightly.
- Sectoral impact: GST has enhanced record-keeping, especially in the unorganised sector which accounts for about 70% of gold transactions. However, higher taxes may encourage gold smuggling or unbilled sales.
GST Calculation on Gold
The final price of gold jewellery is typically calculated using the following formula:
Price of Gold (per gram) x Weight + Making Charges + 3% GST (on the total value)
Since making charges vary, this often leads to differences in the final costs across jewellers.
Exemption for GST on Gold
The GST Council introduced a significant exemption for gold exporters to boost competitiveness and minimize tax burdens. The exemption was announced on 22nd December 2019. At the 31st GST Council meeting, it was announced that GST is exempted from the supply of gold by notified agencies to GST-registered gold jewellery exporters.
- For exports: This exception eliminated the GST liability for registered gold jewellery exporters, minimizing operational costs. Lower costs made Indian gold jewellery exports more competitive in the global market.
- For domestic buyers: Domestic consumers of gold or gold jewellery do not benefit from this exemption. The standard GST rates (3% on gold value and 5% on making charges) continue to apply.
E-Way Bill Rules for Gold
Starting September 13, 2022, the National Informatics Centre (NIC) mandated the use of e-way bills for transporting gold, gold jewellery, and other precious items. This ensures better tracking and regulation of gold movement.
Availability of Input Tax Credit for GST on Gold Business
Gold merchants and jewellers can claim Input Tax Credit (ITC) on GST paid for raw materials or job work expenses. Even if taxes are paid under RCM for services from unregistered workers, ITC can be availed.
Considerations Before Investing in Gold
Hallmark and BIS Certification:
- Ensure purity: Always purchase gold jewellery that is hallmarked or BIS-certified (Bureau of Indian Standards). This guarantees the purity and authenticity of the gold.
Fineness of Gold
- Gold quality and price: The price of gold is directly influenced by its fineness (purity). Lower-quality gold typically comes at a lower per-gram price.
- 24 Carat: The purest form of gold but not ideal for jewellery making due to its softness.
- 22 Carat, 18 Carat, and 14 Carat: These are commonly used for making jewellery, with 22 Carat being the most popular choice
Precious and Semi-Precious Stones
- GST implications: Precious and semi-precious stones used in gold ornaments are taxed differently under the GST regime. Ensure that these stones are listed separately on the purchase bill for accurate tax calculations and transparency.
Price Fluctuations
- Gold price variability: The price of gold fluctuates daily, influenced by:
- Demand and supply: Global demand for gold can impact its price.
- Import duty: Changes in import duties affect gold pricing.
- Currency fluctuations: Currency value changes, particularly the rupee-to-dollar exchange rate, can also affect gold prices.
- Indian jewellery market trends: Domestic market trends play a significant role in pricing.
Conclusion
GST on gold has streamlined the taxation process but also added to the overall cost for consumers. While it has brought transparency and better regulation to the gold industry, the tax burden varies depending on the type of gold product and additional charges like making fees. Buyers and investors must stay informed about these taxes to make educational decisions in their gold purchases. Indiagold makes it easy by providing a streamlined platform to invest in digital gold as well as opt for gold loans for your any needs.
