GST Applicability & Tax Rates on Jewellery
What is GST on Gold?
What is GST on Gold?
The Goods and Services Tax (GST) significantly impacted the gold market. For the most part, the price of gold is not subject to the same GST rate at all levels, from purchasing to manufacturing. Consequently, the supply of the precious metal and its manufacture into gold ornaments are subject to GST. Those looking to buy gold should learn all they can about the GST on gold jewellery 2023 and its implications.
In 2017, when GST was implemented on most commodities in India, gold was no exception. GST of 3% on the value of imported gold and 5% on the making charge of gold jewellery was imposed. This move aimed to increase the transparency of the import and export of gold; however, it had some adverse effects. The vendors started moving into the unorganised sector to escape from the increasing gold price. Under the new GST norms, banks pay 3% additional indirect tax. This tax has increased from 10% to 13%. The increase has become a deterrent for several banks and may remarkably impact the demand for gold. Hence, banks are hesitant to import gold in their account.
Before going into the
details, it is important to make a note of relevant tax rates as notified by
the CBEC.
S. No. | Particulars | HSN/SAC Code | GST Rate |
1. | Rough and un-worked
diamonds, precious and semi-precious stones | 7102, 7103, 7104 | 0.25% |
2. | Pearls, Gold, Silver,
Articles of jewellery of gold, silver, etc | 7106, 7108, 7113, 7118 | 3% |
3. | Job work in relation to
cut and polished Diamonds, plain or studded jewellery of gold, silver, etc | 9988 | 5% |
4. | Other professional,
technical and business services (residuary clause) | 9983 | 18% |
Impact of GST on Gold
Before GST, the effective tax on the gold value was 2% (1% VAT and 1% service tax). With GST becoming 3%, the total price of gold has marginally increased. When one considers the GST on making charges (5%), the effective increase seen in the case above is approximately 2%. This increase is believed to be due to the country’s efforts to reduce gold imports, which help in further decreasing the nation’s current account deficit.
If we view the effect of GST on gold as a seller, then the sellers in the organised sectors are the only ones affected by this government move. Even today, gold is mainly traded in the unorganised sector. Moreover, this move might give a reason for more sellers to choose the unorganised way of trade to avoid tax payment.
Revised Tax Rates on Gold and Gold Jewellery Under GST
As seen in the above tables, the gold and gold jewellery taxes have been revised as per the GST norms since 2017. Though the difference is not much, one can notice a slight overall increase in the metal price by the time it reaches the end-user. However, the work of multiple organisations, such as the service taxes department and the VAT department, has now been combined into one department called the GST. The move is welcome from a bureaucratic level as processes can happen faster within a department. The taxes applicable while buying gold jewellery would thus be:
- 10.75% customs while importing gold from overseas (Customs duty 7.5% ; GST 3%)
- 3% on the value of the gold coin, gold bar, or any gold jewellery
- 5% on the making charges of gold jewellery
Key Factors to Consider Before Buying Gold
Gold is one of the most preferred forms of investment in India. It is also one of the most promising returns-yielding investment options. Thus, numerous people tend to buy gold. Gold may be purchased in two forms, majorly:
- Pure gold biscuits – 24-carat
- Gold ornaments – usually 22 carats
Since it is an important form of investment for many in India, let us understand various factors that we need to consider while buying gold.
1. Purity:
The purity of gold is determined and assessed by hallmarking in India. The agency responsible for the same is the Bureau of India Standards (BIS). The hallmark on gold would be a combination of a number followed by a letter. This would be stamped next to the BIS symbol. There are majorly four types of gold:
- 100% pure with a symbol 24 K:
This is usually bought as an investment. Making jewellery with 24 K gold is not preferred, as gold in its purest form does not have much strength.
- 92% pure with a symbol 22 K:
This is the most popular form of gold used in jewellery making in India today. It includes 8% of other metals like silver, zinc, nickel etc. to make the ornament stronger.
- 75% pure with a symbol 18 K:
If you are looking for ornaments with diamond, then 18 K gold would be a better option as the rest of the 25% of the metals make the jewel stronger and help form a perfect hold for the diamond.
- 58% pure with a symbol 14 K:
These can be preferred for gold ornaments that you would use every day like finger rings, nose rings and earrings. If the jewel would be subjected to hard weather conditions regularly, this would be a better option.
2. Price:
The price of gold varies daily. Hence, ensure you know the gold rate beforehand! The price also depends on the type of gold (24 K/22 K/18 K/14 K). Hence, decide the type of gold you would like to buy in advance so that you can plan better.
3. GST rate on gold:
Ensure that the GST rates are separately mentioned in your invoice when you buy the gold jewellery. Be aware that the GST on gold value is 3% and that on making charges is 5%. The vendor has to mention these separately.
4. Stones and gold:
If you buy a jewel with stones embedded with gold, ensure that the GST rates for the stones and gold are mentioned separately. The GST slabs tend to be different for stones and gold.
Created & Posted by Sony Garg
Accountant at TAXAJ
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