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GST is levied on gold jewellery by way of making charges or as a fixed percentage of the value of gold. Generally, 3% GST is levied on gold jewellery and 5% making charge will also be levied under GST.
Historically, gold has been one of the favourite investment options for Indians. Even today, every auspicious occasion is commemorated with the purchase of gold ornaments, biscuits, or coins. However, the implementation of the Goods and Service Tax (GST) in 2017 had a significant impact on not only the gold trade but also on the retail price of gold. Moreover, varying gold GST rates, like GST on gold ornaments, also make the tax filing process complicated for gold traders and manufacturers. Let us take a look at how the gold rates have been impacted post the GST on gold rules:
Details |
Before GST |
After GST |
|---|---|---|
Sales Tax |
1% |
Nil |
VAT |
1% |
Nil |
Making Charges |
Nil |
5% |
Import Duty |
10% |
10% |
Rate of GST (Value of Gold) |
Nil |
3% |
Businesses dealing in gold also had to adhere to the new taxation regime. The implementation of GST on gold trade has made gold expensive by at least 0.75%. You may refer to the table below to get an idea of the price of gold before and after the implementation of GST on gold:
Particulars |
Pre-GST |
Post-GST |
|---|---|---|
Gold Price |
₹1,00,000 (assumed) |
₹1,00,000 |
Basic Custom Duty (10%) |
₹10,000 |
₹10,000 |
Total |
₹1,10,000 |
₹1,10,000 |
Excise Duty (1%) |
₹1,100 |
Nil |
Total |
₹1,11,100 |
₹1,10,100 |
VAT (1.2%) |
₹1,333 |
Nil |
Total |
₹1,12,433 |
₹1,10,000 |
GST (3%) |
Nil |
₹3,300 |
Total |
₹1,12,433 |
₹1,13,300 |
Making Charges (12%) |
₹13,200 |
₹13,200 |
Total |
₹1,25,633 |
₹1,26,500 |
GST on Making Charges (5%) |
Nil |
₹6,325 |
Total (Final Price) |
₹1,25,633 |
₹1,32,825 |
As can be seen in the table above, before the implementation of the GST law in 2017, a VAT of 1.2% was applicable on gold along with an excise duty of 1%. Now under the new tax regime, this 1.2% VAT and 1% excise duty were replaced by a GST of a flat 3%, resulting in an inflation in gold prices.
Unorganised Sector:
Out of the total gold import of around 700-800 tonnes, at least 30 tonnes are imported illegally through the middle east. This comprises the unorganised gold sector. Merchant associations in the country have been lately demanding a significant decrease in the GST and the import duty applicable on gold so that the merchants do not feel incentivised to smuggle gold across the borders.
Organised Sector:
Ideally, GST implementation is supposed to increase transparency and accountability in the organised sector. However, since GST implementation has resulted in a significant increase in gold prices, it might also have the opposite effect. Currently, only 30% of the gold sector in India is organised. It is feared among the merchant associations that this number might shrink further if the government does not reduce the import duty on gold supplies.
The effect of Goods and Services Tax has multiple advantages and disadvantages. Check our detailed article on the Advantages and Disadvantages of GST in India.
You have to pay a GST rate for gold of 3% along with the applicable customs duty on gold imports. Initially, when the GST law was introduced in 2017, the custom duty on gold was 10% which was increased to 12.5% (for gold bars) and 11.85% (for gold dores’) in 2019. The custom duty was further revised in 2021 on the demand of gold traders and was reduced to 7.5% (for gold bars) and 6.9% (for gold dores’).
Selling gold jewellery or ornaments can be considered as a composite supply of goods and services- the gold used in making is the goods, while the value addition towards manufacturing the ornament is the service. Since the principal supply is the sale of gold, the GST rate of 3% is levied on gold jewellery and ornaments. However, if an individual approaches a goldsmith for carrying out a job work on a gold biscuit and making an ornament out of it, a GST rate for gold of 5% shall be applicable to the service offered by the goldsmith. Repair works on gold jewellery also attract a GST on gold jewellery of 5%.
A GST rate on gold of a flat 3% is levied on the supply of gold coins and gold biscuits. This 3% GST in gold replaced the 1% excise duty and 1.2% VAT which were applicable to gold supply under the pre-GST regime.
The processing or making of gold also attracts tax. There is a 5% charge that is levied as gst on making charges of gold. While the GST on gold was first determined at 18%, the appeals from jewellery councils made the government decrease the GST rate for gold at 5%. Generally, the GST on gold jewellery is either a fixed percentage of the total value of the gold or it is in the form of a fixed charge.
The GST council in its 31st meeting held on December 22, 2018, announced a GST exemption on gold supply. As per this announcement, the supply of gold by notified suppliers to GST-registered gold exporters is exempted from GST. This step was taken to minimise the tax burden on gold exporters in the country.
A jeweller or a gold merchant can claim an Input Tax Credit (ITC) on the raw materials used- the gold and the other job work charges incurred- in manufacturing the gold ornaments/jewellery.
The HSN codes for the various types of gold and gold jewellery are as per the following table:
Gold Type |
HSN Code |
|---|---|
Gold Powder |
7108 1100 |
Gold Coins |
7118 0000 |
Jewellery with Filigree Work |
7113 1110 |
Jewellery Studded with Gems |
7113 1120 |
Jewellery Set with Pearls |
7113 1920 |
Jewellery Set with Diamonds |
7113 1930 |
Jewellery Set with Other Precious and Semi-Precious Stones |
7113 1940 |
Gold Jewellery Unstubbed |
7113 1910 |
Another Article of Jewellery |
7113 1130 |
Imitation Jewellery |
7117 0000 |
Other Unwrought Forms of Gold |
7108 1200 |
Other Semi-Manufactured Forms of Gold |
7108 1300 |
Monetary Gold |
7108 2000 |
You can learn in detail about HSN code in our article GST HSN Code.
While most Indian households consider buying gold not just as an investment but also as a status symbol, it is important to keep the following things in mind when purchasing gold ornaments.
The jewellery that you purchase must be BIS certified or hallmarked. You must ensure that purity is crucial.
Low-quality gold will cost you less and attract a lower gold GST rate.
When buying gold jewellery with precious/ semi-precious stones make sure that they are featured on the bill as such stones are taxed under a separate GST regime.
As the rate of gold changes on a daily basis, the GST on gold would also be influenced by these fluctuations.
No, a GST of 3% is applicable on the supply of gold, while manufacturing of gold ornaments/jewellery and repair work attracts a GST of 5%.
A GST of 3% is applicable on the supply of 24-carat gold along with the applicable custom duty.
No, it is illegal to buy gold without paying the applicable GST.
A GST of 3% is applicable on the supply of old gold and jewellery.
A GST of 3% is levied on the supply of gold coins.
A 3% of GST rate is applicable to gold ornaments and jewellery.
A tax input of 2% can be claimed by a registered gold jeweller on the making charges.
As per the CGST rule 138(14), an E-Way bill is not required for the transport of gold.
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