GST on Gold Jewellery Everything you Need to Know

by Francis Alukkas | 16 March 2022 | GOLD JEWELLERY

Gold jewellery plays an important role in many cultures around the world. It is usually seen as a safe-haven investment too. To this day, India remains to be one of the largest consumers of gold in the world. Be it a wedding or any other festivities, gold jewellery can be seen playing an important part as gifts and other rituals. In some cultures, it is even considered auspicious to purchase gold during festivities

However, buying gold jewellery entails paying more than the gold itself. There will be additional making charges and taxes etc. that come along with it. On 29th March 2017, the Parliament of India passed the Goods and Service Tax Act and it came into effect on 1st July 2017. GST is a single domestic indirect tax law for the whole country that was introduced to replace several other taxes. It is an all-inclusive, multi-stage, destination-based tax that is levied on every value addition. Let us take a brief look at GST on gold in India

GST on Gold Purchase

The Indian Government levies GST on both the manufacturing and services of gold. This means that if you want to buy gold jewellery, you must pay GST on the gold and the making charges. It is not easy to pinpoint the cost because the cost of gold varies from time to time. As a result, the GST also differs.

The GST rates also vary in different stages, from purchase to selling. The only way to save on GST taxes is to exchange old gold jewellery for new pieces. Also, Read: Gold Jewellery Making Charges

Gold Jewellery GST Rate

Basically, gold is subject to three types of taxes. 10% customs duty on imported gold; 3% GST on the price of gold used in the jewellery, and 5% GST on the making charges

To understand better, let us see an example. Suppose the rate of a 24K 10 gm gold is ₹45,000 and that the making charge is ₹3000. Let us calculate how much the ornament will cost with and without GST. The import duty of 10% will be consistent in both. Before GST, the only added tax would be Service Tax + Vat which is around 2%. In this case, that amounts to ₹ 990. So, the total cost of the ornament would be ₹45,000 + ₹4,500 + ₹ 3000 + ₹ 990 = ₹ 53,490. After GST, even with the Service tax and VAT taken away, there will be a 3% GST (₹ 1,458) on Gold and a 5% GST (₹ 150) on making charges. As a result, the total cost of the ornament would amount to ₹45,000 + ₹4,500 + ₹ 3000 + ₹ 1,458 + ₹ 150 = ₹ 54,135. Here, there is a difference of ₹645 in the making of a 10-gm ornament. The difference will only increase as the weight of gold increases.

One thing to be aware of while purchasing gold is that the GST on gold in a jewellery is different from any precious or semi-precious stones on it. Under GST, all gold items will be subject to a 3% tax on the value of the metal and a 5% making charge. This must be paid by the end-user, which in this case will be the customer at the jewellery. Here the only bargain a customer can make is to reduce making charges so that the GST will also decrease accordingly.

The Government of India has declared that some notified individuals and licensed jewellery exporters will be exempted from GST. This is done to encourage India’s Gold export sector and make it more competitive. Licensed jewellers can claim a 2% Input tax credit on their making charges. Also, Read: A Guide on Gold Jewellery Online Shopping

When GST was introduced in India, it was expected that the implementation of an integrated taxing system would bring with it transparency and accountability. But since the introduction of GST, we are witnessing an increase in vendors turning to the unorganized gold market and illegally importing gold to cope with the increasing cost of gold jewellery

What is your opinion on GST that applies to Gold? Are you finding it harder to purchase gold after GST was introduced? Stay tuned for more about GST on gold 2022.


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