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Understanding GST on Gold Jewellery: Expert Guide

Introduction

Indirect taxes levied on many domestic transactions like VAT, service tax, excise duty are basically subsumed into GST. The Goods and Services Tax is a single domestic indirect tax law for the whole of India which was passed in the Parliament on 29 March 2017 and was fully implemented on 1 July 2017. Gold is one of the few commodities on which different GST rates apply at all stages from purchase to manufacturing. If we talk about other countries, basic customs duty and IGST are collected on the import of gold there. In this article, we will discuss in detail how much GST is applicable on manufacturing and import of gold and will also cover various aspects related to it.

GST on Gold Jewellery

If any person buys gold jewellery, GST is levied on it. Apart from this, they also have to pay GST on making charges. Notably, gold import, purchase and manufacturing charges attract different GST rates. However, if a person is selling old gold or using that income to basically buy new gold, then in such a situation that person will not have to pay any tax.
This table will completely show you what the gold rates are before and after GST:

Impact of GST on Gold

As we know, after the implementation of the GST rate on gold, the precious metal has become expensive. As a result, it has reduced the demand for gold in general. Following is the impact of GST on gold:

Price Increase: The price of gold has increased after the implementation of GST. The tax rate which was earlier 1.2% has increased to 3% due to which the total demand for gold has basically reduced. Due to the increase in the price of gold, the liquidity related to investment in this precious metal has also been greatly affected.

In 2024, GST on gold Jewellery implies a 5% tax on gold Jewellery making charges. Generally, GST on gold Jewellery is either a fixed fee or a fixed gold GST percentage. This is why making charges often vary between jewellers, affecting GST on gold coins and Jewellery 

Free Trade Agreement: The Free Trade Agreement has provided great relief to gold sellers. Benefits such as free trade agreements with countries like South Korea have allowed GST registered importers to import gold without incurring an additional 10% customs duty.

Increasing Transparency: The Goods and Services Tax system mandates gold dealers to document every transaction. This fundamentally promotes accountability and transparency in the industry to a large extent. However, it is worth noting that only 30% of this area can be basically classified as organized.

GST Calculation on Gold

The most important thing to note while calculating GST on gold is that there is no standard invoicing pattern followed in this sector, which is why the billing system varies between jewellers. However, in every city there is a jeweller's association which declares the gold price every morning:

Generally we use a basic formula to calculate the final price of Jewellery -

Price of gold X Weight in grams + Making charges + GST applied at 3% on the (price of jewellery + making charges)

Example Of GST Calculation

Let us consider an example that suppose the price of 10 grams of gold is ₹ 40000 and its making charge is 10%. Calculate how much Mr Avinash has to pay with and without GST for 25 grams of raw gold.
Now, we will calculate the final price from the above formula.

This table will help you understand the comparison between the pre-GST and post-GST price of 25 grams of raw gold:

Tax Rates on Gold Jewellery under GST:

Tax Rates on Gold Jewellery under GST are as follows:

  • 10% Customs Duty on gold being imported from overseas.
  • 3% GST on the value of gold in the jewellery.
  • 5% GST on making charges of gold jewellery.

Making charges for gold jewellery can be either in the form of a fixed percentage on the value of gold or a fixed charge.

Considerations Before Investing in Gold

  • As we know, gold prices are constantly fluctuating due to factors like demand and supply of gold which fundamentally affects the final amount paid during the transaction and later it also affects GST on gold jewellery.
  • When buying gold, the GST invoice should clearly indicate the difference between precious and semi-precious stones as they are subject to different tax rules.
  • To ensure the purity of gold, it is always advisable to buy hollmarked gold Jewellery. The price of gold varies greatly depending on its quality, which in turn affects the tax rate originally applied. There are most jewellers who use the highest quality gold which we know as 24 carat. However sometimes they also use 22 carat, 18 carat and 14 carat gold.

Conclusion

The implementation of GST on gold in India has a very significant impact on both buyers and sellers. It is important for all individuals to fully understand these implications. If you want to buy gold, you have to pay attention to various aspects as we have told you in this article. It is important to carefully evaluate all the factors including the possibility of availing loan against fixed deposit before choosing any financial option regarding gold. In this article we have told you in detail about GST on gold.

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