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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, different GST rates, like GST on gold ornaments, also make the tax filing procedure more transparent for gold manufacturers and traders alike. 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% |
The GST rate in India on gold jewellery comprises a 3% levy on the value of gold, split equally as 1.5% CGST and 1.5% SGST. A separate 5% tax is applied to making charges, covering craftsmanship and labour costs for jewellery creation. Digital gold investments also attract a 3% GST, mirroring the rate on physical gold. Exports of gold (bars, coins, and jewellery) are exempt from GST, promoting international trade.
Component |
GST Rate |
|---|---|
Value of Gold |
3% (1.5% CGST + 1.5% SGST) |
Making Charges |
5% |
Digital Gold |
3% |
These uniform rates have replaced older indirect taxes, enhancing transparency and simplifying pricing for consumers.
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.
When purchasing gold jewellery, it's essential to comprehend the dual GST implications: one on the gold's value and another on the making charges. The GST on gold jewellery in India is structured as follows:
GST on Gold Value: A 3% GST is levied on the value of the gold used in the jewellery. This applies uniformly across all forms of gold, including 22-carat and 24-carat gold.
GST on Making Charges: An additional 5% GST is applied to the making charges, which cover the cost of craftsmanship and labour involved in creating the jewellery.
Consider purchasing 10 grams of 22-carat gold at ₹5,000 per gram, with making charges of ₹2,000:
Gold Value = 10 grams × ₹5,000 = ₹50,000
GST on Gold = 3% of ₹50,000 = ₹1,500
Making Charges = ₹2,000
GST on Making Charges = 5% of ₹2,000 = ₹100
Total Cost:
Gold + Making Charges = ₹50,000 + ₹2,000 = ₹52,000
Total GST = ₹1,500 + ₹100 = ₹1,600
Final Price = ₹52,000 + ₹1,600 = ₹53,600
This structure ensures transparency and standardisation across the country, replacing the previous complex tax system.
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.
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.
Understanding the Goods and Services Tax (GST) implications on gold jewellery transactions is crucial for both buyers and sellers in India.
When purchasing jewellery, buyers incur a 3% GST on gold jewellery in india. Additionally, there is a 5% GST on gold jewellery making charges, which cover the craftsmanship involved in creating the jewellery.
The GST treatment on the resale of gold jewellery varies based on the seller's status:
Individuals Selling to Jewellers: When individuals sell old gold jewellery to registered jewellers, the transaction is not subject to GST, as it is not considered a business activity.
Jewellers Reselling to Consumers: Registered jewellers reselling gold jewellery to consumers are required to charge 3% GST on the value of the gold and 5% GST on the making charges, similar to the initial purchase.
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 introduction of Goods and Services Tax (GST) in India has significantly influenced the pricing structure of gold jewellery, impacting consumers directly.
GST on Gold Value: A uniform 3% GST is applied to the value of gold, irrespective of its form—be it jewellery, coins, or bars.
GST on Making Charges: An additional 5% GST is levied on the making charges, which cover the craftsmanship and labour involved in creating the jewellery.
For example, purchasing 10 grams of gold at ₹5,000 per gram results in a gold value of ₹50,000. If the making charges are ₹2,000, the total GST would be:
GST on Gold: ₹50,000 × 3% = ₹1,500
GST on Making Charges: ₹2,000 × 5% = ₹100
Total GST: ₹1,500 + ₹100 = ₹1,600
Final Price: ₹50,000 (gold) + ₹2,000 (making charges) + ₹1,600 (GST) = ₹53,600
Understanding these aspects can help consumers make informed decisions and manage the additional costs associated with GST on gold jewellery.
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.
Many buyers seek legal methods to reduce the GST percentage on gold jewellery in India when purchasing gold.
Purchase sovereign gold bonds, which are exempt from GST, avoiding the 3% tax on the gold value.
Invest through select schemes that offer GST waivers on gold investments under specific conditions.
Opt for extra-gold plans, such as the ‘Extra 5% plan,’ which grants additional gold annually, effectively diluting the GST tax on gold jewellery in India over time.
Negotiate making charges below ₹2,000 to minimise the 5% GST on craftsmanship fees.
Always insist on a detailed GST receipt to ensure transparency, prevent overcharging, and maintain legal proof of your purchase.
Consulting a tax advisor can help identify any state-specific exemptions or schemes that reduce GST liabilities legally.
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% GST rate is applicable to gold ornaments and jewellery.
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