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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, varying GST rates on different types of gold trade also make the tax filing process complicated for gold traders and manufacturers.

Comparison of Tax Rates on Gold Before and After GST

The Goods and Services Tax (GST) was introduced in 2017 with the intent to simplify the taxation system in the country. The GST was supposed to replace all other preexisting indirect taxes on the supply of goods and services. As a result, businesses dealing in gold also had to adhere to the new taxation regime. The implementation of GST on the 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:

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

₹1,10,000

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.

GST on Gold Imports

You have to pay a GST of 3% along with the applicable custom 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’).

GST on Gold Jewellery

Selling of 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 of 5% shall be applicable on the service offered by the goldsmith. Repair works on gold jewellery also attract a GST of 5%.

GST on Gold Coins & Gold Biscuits

A GST of flat 3% is levied on the supply of gold coins and gold biscuits. This 3% GST replaced the 1% excise duty and 1.2% VAT which were applicable on gold supply under the pre-GST regime.

Exemptions of GST on Gold

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.

Effects of GST on the Gold Sector

  • 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 Advantages and Disadvantages of GST in India.

Input Tax Credit in Gold Business

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.

HSN Code for Gold & 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.

Conclusion

GST on gold jewellery was introduced with the idea to bring about a degree of transparency within the sector. However, a slew of issues has erupted as a result of this taxation system. One of the main problems is that vendors are increasingly seeking refuge in the unorganised gold trade, which has resulted in a rise in the illegal import and export of gold.

GST on Gold FAQs

  • ✔️Does gold have 12% GST?

    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%.

  • ✔️What is GST on 24-carat gold?

    A GST of 3% is applicable on the supply of 24-carat gold along with the applicable custom duty.

  • ✔️Can I buy gold without GST?

    No, it is illegal to buy gold without paying the applicable GST.

  • ✔️How much is the GST on old gold?

    A GST of 3% is applicable on the supply of old gold and jewellery.

  • ✔️What is the tax on gold coins?

    A GST of 3% is levied on the supply of gold coins.