GST on Gold Impact on Imports, Jewellery, and other Sectors.

Isn’t it good to know how much GST an individual has to pay to buy gold? Well, the answer is shocking because there is a total of 3% increment in charges after the applicability of GST on gold. The GST impacted all sectors but especially gold. There is different GST on raw gold, gold bars, making of gold, redesigning and more and that can be discussed for a long time.

To make you aware of all the legal things we are introducing you to the GST impact on gold, GST impact on gold ornaments, and much more.

Let’s start,

What is GST on Gold?

GST is a goods and services tax levied on almost every good and service across India. And, since the day it was levied it has had a huge impact on everything including Gold. On gold ornaments, one has to pay 3% of GST.

And, if an individual wants to redesign an old gold ornament then the GST will be applicable 18% for the making charges because here you are providing your own gold. GST on gold purchase is applicable when you are buying it even digitally.

Furthermore, the same case is applicable to Gold Exchange Traded Funds that are offered by the mutual fund offering companies. But in this case, gold ETFs the GST is paid back to the investor as they take the input credit. In the meantime, in the case of gold bonds, there is no procedure involved in buying the gold physically and also no GST is levied.

What is the GST Impact on Gold?

We set the context right and display the difference between the gold price after and before GST, here we have computed a table for you.

As we discussed above till 30th June 2017, only service tax and VAT tax was applicable on the purchase of gold but it was replaced by GST from 1st July 2017.

Here is the example in a tabular form so that you can easily compare the price and before GST and after GST impact on gold.

Taxes on Gold	Before GST	Under GST (not composite supply)	Under GST (composite supply)
Basic Cost of Gold (10 gm)	1,000,000 (assume)	1,000,000	1,000,000
Basic Custom Duty (10%)	10,000	10,000*	10,000*
Assessable Service Tax	1,10,000	1,10,000	1,10,000
Service Tax (1%)	1000	NIL	NIL
Assessable for VAT	1,11,000	1,10,000	1,10,000
VAT (1%**)	1,111	NIL	NIL
Assessable for GST	1,12,111	1,10,000	1,10,000
GST on Gold (3%)	NIL	3,300	–
Total Value of Gold	1,12,111	1,13,300	1,10,000
Making Charges (10%^)	5,500	5,500	5,500
Assessable Value for GST	1,17,611	1,18,800	1,15,500
GST on making charges (5%)	NIL	275	–
GST on gold ornament at 3%^^ (For composite supply)	–	–	3,465
Complete Value of Gold Ornaments	1,17,611	1,19,075	1,18,965

Single * implies that the customs duty rate was increased to 12.5% from 10% vide Finance Act 2019.

Double ** indicates that assuming 1% tax that may vary according to the state/UT.

Single ^ implies making charges may vary from one jeweller to another. And here we are assuming it to be 10%.

Double ^^ indicates that the supply of gold is being considered as a composite supply. Therefore, the GST on gold ornaments is chargeable along with making charges, which is 3%.

From the tabular comparison, we can state that – there is a total rise of Rs. 1,354 that is 1.1% of increment under GST. Also, the price jumps directly from 2% – 3% under the GST laws on pure gold bars. The new taxes under GST lead to the rise in price.

What is the GST Impact on Gold Imports?

GST is applicable on gold when it is imported from one state to another via IGST (Inter-state Goods and Services Tax) at 3%. But international imports are not subjected to GST laws or taxes.

But if any registered business owner or a singular person does import gold from outside India, then he has to make the payment as per custom duty at a 10% interest rate (payable on gold imports, gold bars, raw gold, or semi-finished gold) instead of paying just the GST amount on gold.

However, the cost is further passed to the end-user, and GST is chargeable along with any custom duty tax amount (paid by the person who imports the gold).

The revised tax rates after GST on gold are as follows:

10% GST on custom duty on gold if imported from overseas
3% GST on the value of gold
5% making charges of the gold jewellery

Note: Making charges differ from one jeweller to another which impact the price of the purchased gold jewellery.

Though with the implementation of GST, the illegal smuggling of gold has increased especially from the middle east due to the hike on custom tax.

Here is the current GST on Gold Exemption –

The two major changes took place in Budget 2019 and Budget 2021.

Budget 2019: The customs duty tax on gold bars imported from outside India was increased to 12.5% from 10%.

Budget 2021: Finance Minister Nirmala Sitharaman stated that the customs duty tax on gold bars imported from outside India will be decreased to 7.5% from 12.5%.

What is the GST Impact of Gold Jewellery Prices?

GST on gold ornaments or jewellery according to the Section 8 that falls under the CGST Act states that if any common person sells gold jewellery or ornaments then it will be considered as a composite supply. The making charges are taken as job work whereas the gold is regarded as good. But considering the fact, that the primary supply is considered as the sale of gold and the GST of 3% will be charged instead of the 5% goods and services tax on the total amount of jewellery whether the jeweller shows making charges or not.

Also, several gold sellers or jewellers offer the functions of goldsmiths who work on raw gold such as gold biscuits or bars which are provided to them for making beautiful masterpiece jewellery. And, this whole process is regarded as service of supply. Moreover, the goldsmiths registered under GST will charge making charges for making pieces of jewellery at 5%. But if they are not the registered gold merchant or jeweller will have to pay the GST at 5% that too on a reverse basis.

Also, customers who directly went to any goldsmiths will have to pay the amount as per the 5% GST. However, the repairing work on the gold ornaments will be payable up to 5% tax under GST laws.

How Gold, GST, And the Unorganized Sector Related?

Due to GST most of the jewellers are turning towards the grey market to sell their tons of smuggled gold without paying GST. And, that is how they are escaping from their 15.5% of duty tax which is illegal.

But after demonetisation in 2016 November and the introduction of GST on 1st July 2017 the jewellers are forced to be registered as small, medium or large enterprises due to which many of them even closed their businesses. Another reason is that they are not competent enough to be a part of the grey market where gold is untaxed. It is just for people with big money.

And, that is how, GST, gold, and the unorganized sector are connected. The jewellers are not ready to pay a tax of a total of 15.5% (12.5% import duty tax and 3% GST tax) legally.

Is there any Relief on GST present for gold?

In the GST’s 31st council meet in the year 2018, 22nd December Indian government announced the exemption on GST. As a result, GST is not chargeable for supplying the gold created by the standard agency to any GST registered gold jewellery exporters.

This decision has decreased the burden of GST on all verified exporters of gold ornaments in India and made the exports a more competitive market again in the global market. But the negative part is that none of the domestic buyers benefited from this decision of the Indian government.

Wrap Up!

GST on gold purchase has impacted and is still impacting the Indian markets and domestic buyers. We hope now you understand how GST influences the price of gold over these years. Itv may sound like a villain but it is a very crucial step that was required for making India economically strong and a part of the global market.

There is no denial that GST impacted the gold and silver market but there is no denial that it has led India towards betterment as well.

Frequently Asked Questions (FAQ’s)

Is GST valid for the exchange of gold?

In the year 2017, the then finance minister stated that the sale of Gold by any individual is not an advancement of his business thus, the exchange of Gold for any personal use will be taxed at zero GST. Nevertheless, the customer has to pay a 3% GST on the final product.

Is there any tax on gold purchases?

Yes, there is a 3% levied tax on the purchase of gold and a 55 making fee under the GST. Making charges are considered as labour charges that are charged by the sellers.

What was the tax slab on gold before GST?

GST was implemented in the year 2017 on the 1st of July. And, before its implementation, one has to pay a service tax and Value Added Tax of 1% each. Therefore, 2% extra was charged on the selling price of gold from the consumers. And, gold became more expensive after the 3% GST tax levied on gold.

What is the GST rate on gold jewellery?

The GST rate on all gold jewellery is levied at 3% of the tax.
For example – If a gold ornament is of Rs. 45,000 per 10 gm and making charges are at the rate of 10%, then the total cost will be accounted as Rs. 45,000 plus 10% of the principal amount i.e, Rs. 49,000. And 3% GST rate of Rs. 49,000 will be levied making the total payable amount Rs 50,985.

Is it possible to avoid GST while selling or buying Gold?

There is no legal way to sell or buy gold without paying GST. And, if someone is selling or buying the gold without GST then they are unregistered individuals. This activity will not be considered as a scheme or plan to expand business thus there will be zero scopes for GST. But if companies sell second-hand jewellery then GST is applicable. And, these GST charges will be calculated according to rule 32(5) of CGST rules (conditions applied).