The gold market experienced a considerable change due to the enactment of the Goods and Services Tax (GST). In general terms, the same GST rate does not affect the price of gold throughout the entire chain, that is from sourcing to manufacturing the product. Therefore, it makes sense to conclude that GST would also include the sale of the precious metal along with the making of gold ornaments. Anyone aspiring to invest in gold should make a detailed analysis of the construction of the GST gold rate 2024 plus its effects. To be able to stay within the law and help the business to be able to claim input tax credits in due time, fast and proper GST registration is key.
What Is GST on Gold?
Goods and Services Tax, or GST, is a tax imposed on the provision of goods and services in India. The GST rate of 24k gold is different and varies with type of gold and services offered.
Particulars | HSN Code | GST Rate |
(1) Precious stones (other than diamonds) and semi-precious stones, whether or not worked or graded but not strung, mounted or set (2) Ungraded precious stones (other than diamonds) and semi-precious stones, temporarily strung for convenience of transport (includes synthetic or reconstructed stones, apart from unworked or simply sawn or roughly shaped) | 7103, 7104 | 0.25% |
Diamond, gold, pearls, silver, or articles of jewelry of silver or gold, and so on, including synthetic or reconstructed stones, unworked or simply sawn or roughly shaped | 7101, 7102, 7106, 7107, 7108, 7109, 7111, 7113, 7114, 7116, 7118 | 3% |
Job work about cut and polished diamonds, plain or studded jewelry of gold, silver, and so on | 9988 | 1.5% |
Here Is a Table of Gold GST Rate
Type of Gold | GST Rate |
Gold Bars, Coins, and Jewelry | 3% |
Making charges for Jewelry | 5% |
Goldsmith or Silversmith services | 5% |
Gold Import | 10.75% (including customs duty of 7.5% and 3% GST) |
Impact of GST on Gold
The gold industry in India has been significantly affected by the introduction of Goods and Services Tax (GST) gold rate in 2024. The following are a few of the specific effects of GST on gold:
- Increase In Price: The price of the precious metal has risen since the 24-carat gold GST rate was introduced. Generally speaking, the demand for gold dropped due to the increase in the tax rate from 1.2% to 3%. The gold demand has declined on account of the increasing cost of gold as well as the liquidity effect of gold investments.
- GST on Gold Jewellery: In 2022, the GST gold rate is equivalent to a 5% tax on manufacturing costs. GST on gold jewelry is usually applied as a flat fee or as a fixed percentage of the value of the gold. Because of this, making fees frequently differ amongst jewelers and have an impact on the GST on gold coins and gold jewelry.
- Improved Transparency: Every transaction involving gold dealers must be recorded under the Goods and Services Tax system. It is anticipated that this will increase transparency and accountability between the two economic divisions. Remarkably, just 30% of this industry falls into the organized category. Therefore, a high price is thought to encourage sellers to smuggle gold or sell the precious metal without a valid bill.
- Other Factors: In addition to the gold price of GST in 2024, other elements contributing to higher gold prices are surplus liquidity, currency ratios, decrease of gold mining, and gold price increase in the global market.
- Free Trade Agreement: Import of gold by customs-registered importers is being removed from the additional 10% custom duty benefits of free trade agreements with countries (e.g., South Korea) etc.
Note: Figures in the table below are for illustrative purposes only, and the actual values will be different depending on cost of processing and the current GST rate. Never take more than required for the purchase and ask about the rate of Goods and Service Tax with the retailer.
Parameter | Example |
Weight of Gold | 10 grams |
Price of Gold | ₹ 6,385 per gram |
Cost of Gold | 10 grams x ₹ 4,500 per gram = ₹ 63,850 |
Making Charges | ₹ 500 per gram |
Cost of Making Charges | 10 grams x ₹ 500 per gram = ₹ 5,000 |
Total Cost of Jewellery | ₹ 68,850 |
GST Rate on Gold Jewellery | 3% |
GST on Making Charges | 3% of ₹ 5,000 = ₹ 150 |
Total GST Payable | ₹ 150 |
Total Cost of Jewellery after GST | ₹ 69,000 |
Comparison of Gold Price Before and After GST
The price of goldbar, bullion and pure gold market price is represented by those of gold mining, gold refining, and gross profit. All of them are affected by the tax. With the increase in the demand of precious metals, gold imports have not been influenced. Import tariff was kept as 10% before and after the introduction of GST regime. As opposed to claims made by somebody else, the GST has not, for example, been the reason for smuggling activities increase. Since profit margin is a matter of judgment, it is not dealt with here. There are additional fees for gold jewelry.
Particulars | Pre-GST | Post-GST |
VAT | 1% | 1% |
Sales Tax | 1% | Nil |
Gold making charges | Nil | 5% |
Import duty | 10% | 10% |
GST Rate (Gold value) | Nil | 3% |
At present, the duty is 7.5%, job costs involved in gold jewelry making are 5% and gold and jewelry items associated with gold are levied with 3% GST. Thus, 10.5% of total cost is the customer’s final Goods and Services Tax and tariff effect on pure gold.
GST rates of gold purchase and GST rates of gold making.
Reselling of gold (made into to) jewelry and ornaments to the general public, can be considered as an integrated supply of goods/services, as per Section 8 of CGST Act. Despite the fact that work related activity is involved in manufacturing/value addition, gold is regarded as a high quality article in this context. The 3% GST rate is levied on the combined value of the jewelry, as the supply of gold is the primary source of supply for the business, regardless of the cost breakdown, being the individual cost of each component and parts. In the sector-specific frequently asked questions (FAQs) document on GST on gold, including the GST rate on 24-carat gold, the Central Board of Indirect Taxes and Customs (CBIC) has set the record straight on this matter.
Gold mining and distribution firms that are dealing with GST are subject to the same GST registration threshold limits as any other tax payer are the case . Under Section 10 of the CGST Act, companies dealing in gold also can avail the composition scheme.
In order to finish job work for the gold bars/gold biscuits provided to manufacture jewelry, a large number of gold merchants, vendors (i.e., dealer), jewelers is usually engaged in the services of goldsmiths and experts. These services are regarded as a service supply. For their services, the goldsmiths collect a fee known as “making charges,” which are taxable at the 5% GST rate. For the goldsmiths or experts who are not registered under the GST, the gold merchant or jeweler is required to pay GST at 5% reverse charge.
When a goldsmith holds himself/herself to the registration under the GST, the customers who come to them directly will have to pay 5% GST.
Un registered individuals are exempt from the levy of the goods and service tax (GST), at the time of sale of gold jewelry or exchange of jewelry to buy a new piece of jewelry at jewelry shops. Such transactions fall outside the scope of the GST as definitions of supply and are not considered to be an integral part of any business activity. Yet, provided that there are certain conditions, then GST is imposed on the value of the gold as calculated according to Rule 32(5) of the CGST Rules, if any dealer or gold firm including Attica Gold Company, Aashraya Gold Company or Manappuram Gold Loan purchase and sell second hand gold jewelry.
Calculation of GST on Gold
In the case of calculating the GST Gold rate the cost of gold ornaments, coins or bars and biscuits are include the profit margin, but exclude any making charge. On the other hand, the manufacturing cost is also embedded in the price of gold jewelry. Before 30th June, 2017, the value of gold jewelry was taxed with VAT and service tax which was then replaced with GST, respectively.
Particulars | Before GST (₹) | Under GST (Not as a composite supply) (₹) | Under GST (As a composite supply) (₹) |
The base price of 10 gm of gold (Assumed) | 1,00,000 | 1,00,000 | 1,00,000 |
Add: Basic customs duty (10%) | 10,000 | 10,000* | 10,000* |
Assessable value for service tax | 1,10,000 | 1,10,000 | 1,10,000 |
Add: Service tax (1%) | 1,100 | Nil | Nil |
Assessable value for VAT | 1,11,000 | 1,10,000 | 1,10,000 |
Add: VAT (1%**) | 1,111 | Nil | Nil |
Assessable value for GST | 1,12,111 | 1,10,000 | 1,10,000 |
Add: GST on gold at 3% | Nil | 3,300 | — |
The total value of gold | 1,12,111 | 1,13,300 | 1,10,000 |
Add: Making charges at 10%^ | 5,500 | 5,500 | 5,500 |
Assessable value for GST | 1,17,611 | 1,18,800 | 1,15,500 |
Add: GST on making charges at 5% | Nil | 275 | — |
Add: GST on gold jewelry at 3%^^ | — | — | 3,465 |
Total value of gold jewelry | 1,17,611 | 1,19,075 | 1,18,965 |
Taxes on Gold Ornaments Under GST Have Been Revised
In the past, the consumer paid a 2% premium for gold, of which 1% went to service tax and 1% to VAT (Value Added Tax). Following the introduction of the levy, customers will pay a 3% and 5% levy on the gold price and ornament fabrication respectively.
- Although this is an increase over rates just before the tax, the government lowered them in the wake of public outcry when it promised an 18 percent rate. Since halving the goods and services tax (GST) on gold jewelry in 2024, gold prices have soared because almost all gold enters India.
- Finance Act 2019 set the customs duty rate to 12.5%, as opposed to a level of 10%.
- Assumed to be 1% but variable with state/UTs.
- Each jeweler has different making fees. In this instance, we take it to be 10%.
- The rate of gold GST, including making charge, which is applicable is 3% when the supply of gold jewelry is treated as composite supply. It is proposed that the principal source is the gold source.
Exemptions for GST on Gold
Relaxation of the GST on was announced in the 31st meeting of the GST Council on 22ndDecember 2018. Therefore, if the implementing agency supplies gold to the registered gold jewelers under GST, then the GST will be exempted.
In addition to relieving the strain of the GST on Indian gold jewelry exporters, this judgment may have in fact boosted the place of Indian gold exports in the international market. On the other hand, the buyers of gold ornaments in the house are unaffected by this waiver.
GST on Digital Gold Purchase
It is very difficult to acquire gold as an investment when dealing with the physical form of gold, due to space and security constraints. A simpler option is digital gold, the provision that can be bought over the internet and safely kept in a vault. This removes concerns regarding purity, security, and storage.
The point of sale the value of digital gold is subject to a GST rate of 3. There is no need for additional GST when you sell or redeem digital gold as the taxable amount is charged to the seller and passed to the government. Due to this, digital gold is a simple and cheap investment option.
E-Way Bill Rules for Gold and Its Forms
Up to September 13th, 2022, as per CGST Rule 138(14), transport of gold in any shape or form, such as gold jewelry, gold craft, and articles (Chapter 71) did not need e-way bill. Therefore, movement of gold may be made in the absence of e-way bill, if the seller or the consignee was not registered with GST.
However, based on state announcements, National Informatics Centre (NIC) has also provided a separate screen for the generation of e-way bill specifically for the movement of gold, gold articles or precious stones as on 13th September 2022.
Availability of Input Tax Credits for GST on Gold Business
The Input Tax Credit (ITC) on the cost of raw materials (i.e., gold) used, as well as other costs relating to job activity, may be reversed by the jeweler or gold merchant. The gold merchant remains entitled to claim the ITC even though they are liable for reverse charge tax on goods supplied by an unregistered job worker.
Exclusivity From the GST
During the 31st GST council meeting, it was revealed that gold supply to licensed jewelry exporters might be exempted from Goods and Service Taxes (GSTs). Through this exemption, the aim is to lighten the burden of Goods and Service Tax imposed on exporters of gold ornaments so that it will help the Indian gold export industry to compete globally. But the Input Tax Credit at 2% of jewelry making is provided for authorized jewelers. Accordingly, the exemption will be to the advantage of gold jewelry exporters at the expense of local consumers.
However, to the contrary of hopes that the introduction of the tax would foster more transparency and responsibility in this sector, the suppliers are engaging in illegal raw gold imports and chaotic gold trade channels.
The E-Way Bill Rules for Gold and Its Forms
According to CGST Rule 138(14), prior to September 13, 2022, the transportation of gold in any form, including jewelry, goldsmith’s wares, and items (Chapter 71), did not require an electronic waybill. So, in extension if the gold seller or gold recipient is GST registered or not, carrying of gold is not ruled out even without an electronic waybill.
From September 13, 2022, NIC made available, via announcements from the states, an independent window for the issuance of electronic waybills for transportation of gold, gold jewelry, or gems.
Considerations Before Investing in Gold
- The final transaction value is a determinant of GST on Gold Jewellery 2024 because gold prices tend to move unpredictably, due to factors such as supply, demand and currency changes, etc.
- Since precious and semi-precious stones are subject to different tax codes, they should be recorded item-wise on the bill of sale.
- It is necessary to always purchase your gold jewelry with a hallmarks to ensure it is the same purity.
- The price of gold may be highly different according to its quality. Therefore, the gold quality is the determinant for the tax rate. Most jewelers use 24 carat gold, the highest grade, to make gold jewelry. However, also 14 karat, 18 karat and 22 karat gold are used quite often.
Popular Advance Rulings on GST on Gold
On March 23, 2020, Karnataka AAR issued order KAR/ADRG/15/2020 in m/s Attica Gold Pvt. Limited.
- Matter/Issue: According to the above gold company who is registered under GST, it does a prompt settlement of the gold while returning the pledged gold at the current market price. The following concerns were resolved when buying used gold from unregistered individuals, provided that the goods’ kind or quality remains unchanged:.
- Valuation: According to Rule 32(5) of the CGST Rules, is GST solely applied to the difference between the buy and sale prices?
- ITC Claim: Are the business eligible for Input Tax Credit (ITC) when the marginal method is used to cover purchases from dealers?
- Valuation: Yes, Rule 32(5) of the CGST Rules will be applied to assess the value of gold purchased from unregistered person if such business lodges an invoice stating the goods as second hand or deal with them without altering their form or nature. The positive difference between the purchase and sale prices will be the GST valuation. GST will not be levied, however, if the cost basis is greater than the sales price. One specification will be the lack of input tax credit availability.
- ITC Claim: You can benefit from ITC if you buy second hand gold jewelleries from a registered person. In these cases, as the above-mentioned margin approach cannot be applied to future trades by the gold company, the gold company will not be able to utilize the previously discussed margin strategy.
- Matter/Issue: The applicant company is engaged in the manufacture of hybrid seeds and crop protection agents. Kharif Gold Scheme 2018″ was a sales promotion scheme that was launched. In other words, the program gives consumers 10 gm and 8 gm gold coins for purchases over a specific amount and for completing minimum payments, respectively. The following problem was resolved:
On December 20, 2018, the Maharashtra AAR rendered a decision in the case of M/s Biostadt India Limited, order GST-ARA-72/2018-19/B-165 Mumbai.
Things to Consider Before Buying Gold Ornaments
- To ensure purity and authenticity of your gold ornaments please look for hallmarked or BIS marked products.
- The refinement of gold determines its price. Lower gold purity comes at the expense of lower pergram cost but lower price (value).
- Although the 24 karat gold (we may write these alloys in the same sequence) is just optimal, it cannot provide for jewelry making. Commonly, 22-, 18-, or 14-carat gold is used in thickness for jewelry.
- On the other hand, it should not be minimized that according to the GST legislation, the articles, decorated with precious or semiprecious gemstones, are subject to a different tax rate. Thus, the purchase bill itself should include them distinctively.
- Because of all the reasons for an ever changing price such as supply demand imbalance, import duty, currency devaluation, demand or situation in the Indian jewelry market, the gold price is fluctuant from day to day. In India, these elements significantly affect gold trades.
Conclusion
Gold is also a commodity subject to tax at multiple points in the supply chain. To make a good decision to buy the user should have holistic perspective and their mastery of the product. Therefore, to calculate how much GST needs to be charged for gold jewelry, one has to look into professional services provided by Auditor Shiva Indeed.
