The Goods and Services Tax (GST) has had a significant impact on the market for various commodities, including gold. With the introduction of GST rate on gold has become subject to multiple tax slabs at different stages, from importation and purchase to the manufacture of gold ornaments. As a result, both buyers and sellers need to understand the various GST rates applied to gold and its associated charges.
GST is applied to gold when it is purchased, imported, or when making charges are paid on gold jewellery. The GST rate on gold includes taxes on both the value of gold and the making charges. Notably, individuals do not have to pay GST if they are selling old gold and using the proceeds to purchase new jewellery. This means that purchasing gold in exchange for old gold can be a way to save on GST taxes.
To understand the impact of the GST rate on gold, it’s helpful to look at the rates before and after its introduction. Here’s a comparison:
| Tax Type | Pre-GST Rate | Post-GST Rate |
| VAT | 1% | Nil |
| Sales Tax | 1% | Nil |
| Gold Making Charges | Nil | 10% |
| Import Duty | 10% | 10% |
| GST on Gold Value | Nil | 3% |
The implementation of GST has directly impacted the demand for gold. The prices of gold have risen due to the introduction of taxes, which has led to a reduction in overall demand. However, certain policies, such as the Free Trade Agreement with countries like South Korea, have allowed GST-registered importers to avoid the additional 10% customs duty.
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The rising price of gold has reduced its demand, which, in turn, affects the liquidity and investment in gold. However, trade agreements and GST exemptions for registered importers of gold can help mitigate some of these challenges.
GST is charged on both the value of gold and its making charges. The making charges for jewellery typically attract a 3% GST, while the making charges themselves are subject to a 5% tax. This means that the GST rate on gold jewellery varies depending on the jewellery and the intricacy of the making charges.
GST has brought more transparency and accountability to the gold market, especially in the organized sector. However, concerns have been raised that high tax rates could push some vendors in the unorganized sector to smuggle gold or sell it without proper invoices, which can undermine the effectiveness of GST.
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The calculation of the GST Rate on gold involves adding the value of gold, the weight of the gold, the making charges, and then applying the GST on the combined total. Here’s the general formula:
Let’s calculate the price for Mr. Ravi’s purchase of 25 grams of raw gold, where the price of gold is Rs. 40,000 per 10 grams, and the making charge is 10% of the gold price.
| Item | Pre-GST | Post-GST |
| Cost of 25g of Gold | Rs. 10000 | Rs. 10000 |
| Customs Duty (10%) | Rs. 1000 | Rs. 1000 |
| Service Tax | Rs. 1100 | Nil |
| GST (3%) | Nil | Rs. 3300 |
| VAT (1%) | Rs. 1333.20 | Nil |
| Final Price | Rs. 11243.20 | Rs. 11300 |
In this example, Mr. Ravi pays Rs. 11300 for 25 grams of raw gold after the introduction of GST.
There are certain exemptions under GST for gold transactions. For instance, gold supplied by a notified agency to registered jewellery exporters is exempt from GST. This exemption is designed to make Indian gold exports more competitive internationally. Jewellery exporters can also claim a 2% Input Tax Credit (ITC) on making charges.
Before buying gold ornaments, it’s essential to keep a few factors in mind:
The GST Rate on gold has added a layer of complexity to gold purchases and investments. While it has made gold slightly more expensive, understanding the nuances of gold taxation, such as GST on making charges, import duties, and exemptions, can help you make informed decisions. Whether you’re buying gold jewellery or investing in gold, it’s crucial to be aware of these changes and how they impact the final price.
The GST rate on gold is 3% on the value of gold, and an additional 5% is levied on the making charges of gold jewellery.
No, GST is not applicable when you sell old gold or use the proceeds from selling old gold to purchase new jewellery.
Yes, GST applies to the purchase of gold coins, and the GST rate on gold coins is also 3%.
No, gold buyers cannot claim a refund of GST. However, jewellery exporters can claim an Input Tax Credit (ITC) on making charges.
The GST on gold increases the overall price due to taxes on both the gold value and the making charges. This increase has led to a decline in demand, particularly in the domestic market.
You can save GST costs by exchanging old gold for new jewellery, as GST is not charged on the transaction of old gold. Also, consider purchasing gold from registered jewellers who offer competitive pricing.
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