GST on Gold: Effects of Gold GST Rate in India 2024

GST (Goods and Services Tax) plays a key role in the pricing and selling of gold in India. Let’s break it down into simpler terms to understand how GST rate affects gold purchases and services.

What is GST on Gold?

GST is a tax that applies when you buy or sell goods and services, including gold. The GST rate depends on whether you’re buying raw gold, jewelry, or paying for services like making the jewelry. Here’s how it works:

1. Buying Gold (Bars, Coins, Jewelry): When purchasing gold, whether it’s in the form of bars, coins, or jewelry, you’ll be charged 3% GST on the price of the gold.
2. Jewelry Making Charges: If you’re getting jewelry made, the labor costs, known as “making charges,” have a 5% GST added to them.
3. Goldsmith or Silversmith Services: Any services from a goldsmith or silversmith on gold or silver items will also attract a 5% GST.
4. Importing Gold: If you’re importing gold from abroad, a total tax of 10.75% applies. This includes both a 7.5% customs duty and 3% GST.

How Does This Impact You?

• When Buying Jewelry: You’ll be paying 3% GST on the value of the gold and another 5% GST on the making charges. So, both the material and the labor get taxed.
• When Importing Gold: The combined tax of 10.75% means imported gold will come at a higher cost.

Knowing these GST rates helps you understand what you’re really paying when buying gold or having jewelry made.

Table of Gold GST Rate

Here is a simplified table showing the GST rates related to gold:

This table provides a quick overview of the different GST rates that apply to gold in India.

Impact of GST on Gold

The introduction of GST on gold has had several effects on both buyers and sellers. Let’s look at how it impacts things in a simpler way:

1. Gold Costs More for Buyers

• Tax on Gold: When you buy gold (whether it’s bars, coins, or jewelry), you now pay a 3% GST, which makes gold slightly more expensive than before.
• Making Charges: If you’re buying jewelry, you also pay an extra 5% GST on the making charges (the cost of turning raw gold into a finished piece of jewelry). This adds to the total price.

2. Help for Businesses

• Input Tax Credit: Jewelers and goldsmiths can claim back some of the GST they pay on materials they use, such as raw gold or tools. This helps them lower their overall tax, which can be a benefit for their business.

3. Simplified Taxes

• Same Tax Everywhere: Before GST, different states had different taxes on gold, making it confusing. Now, there’s just one GST rate for the whole country, which makes things simpler for both buyers and sellers.

4. Higher Cost for Imported Gold

• Importing Gold is More Expensive: When gold is imported from another country, it now comes with a 10.75% tax (this includes customs duty and GST). This makes imported gold pricier, which can raise costs for jewelers and, in turn, consumers.

5. Challenges for Small Jewelers

• More Paperwork: Smaller gold businesses may struggle with the extra paperwork and rules needed to comply with GST. This can increase their costs and effort in running their business.

6. Encourages Transparency

• Less Hidden Deals: GST makes it harder to buy and sell gold without reporting it, so it encourages more honest, documented transactions. This helps clean up the gold market and reduces illegal or hidden cash deals.

7. Stable Gold Prices

• Prices Are More Consistent: The introduction of GST has raised the price of gold slightly, but it has also helped make prices more stable across different regions by having the same tax rate everywhere.

Comparison of Gold Price Before and After GST

Before GST

• Different Taxes:
  • A 1% Excise Duty was applied to gold.
  • 1% VAT (Value Added Tax) was also charged, but the rate differed by state.
  • A 10% Customs Duty applied to imported gold, which is still in effect today.
• Making Charges:
  • Taxes on making charges varied depending on the state, making it harder to know exactly what you’d be paying.

After GST

• GST on Gold:
  • Now, a 3% GST is charged on gold (whether it’s bars, coins, or jewelry).
  • There’s also a 5% GST on the making charges for jewelry.
  • The 10% Customs Duty on imported gold is still there, but with an added 3% GST.

Example: Price Comparison

What Changed?

• Before GST, taxes were a bit lower, but the system was more complicated because different states had different tax rules.
• After GST, the tax system is more consistent: there’s 3% GST on gold and 5% on making charges. While this simplifies the process, it does mean a slight increase in total cost.

In short, the price of gold has gone up a little due to GST, but the tax system is easier to understand now. There’s less confusion, and you know exactly what taxes you’re paying when you buy gold or jewelry.

GST Rates on Gold Purchase and GST on Gold Making

1. GST on Buying Gold

• When you purchase gold, whether it’s in the form of bars, coins, or jewelry, you’ll need to pay a 3% GST on the price of the gold.
• For imported gold, there’s a total tax of 10.75%, which includes 7.5% customs duty and 3% GST.

2. GST on Jewelry Making Charges

• When you have jewelry made, there’s a 5% GST on the making charges. This tax is only applied to the labor cost for crafting the jewelry, not on the value of the gold itself.

Example Breakdown:

• Buying Gold:
  • Suppose you buy 10 grams of gold at ₹4,500 per gram, bringing the total cost to ₹45,000.
  • 3% GST on this would be ₹45,000 x 3% = ₹1,350.
  • So, the total cost for the gold would be ₹45,000 + ₹1,350 = ₹46,350.
• Jewelry Making Charges:
  • If the making charges are ₹500 per gram, for 10 grams it would be ₹5,000.
  • 5% GST on the making charges = ₹5,000 x 5% = ₹250.
  • So, the total making charge after GST = ₹5,000 + ₹250 = ₹5,250.

Total Cost of Buying Jewelry with GST:

• Combining both the gold cost and the making charges:
  • Gold cost (with 3% GST) = ₹46,350
  • Making charges (with 5% GST) = ₹5,250
  • Total cost of the jewelry = ₹46,350 + ₹5,250 = ₹51,600

Summary:

• You pay 3% GST on the price of the gold-jewelry.
• You pay 5% GST on the cost of making the jewelry.
• For imported gold-jewelry, you’ll pay a total of 10.75% in taxes, including customs duty and GST.

This explanation shows how GST is applied separately to both the gold and the process of making jewelry, which adds to the overall price.

How to Calculate GST on Buying Gold?

When you buy jewelry, you’ll need to pay a 3% GST on the cost of the gold.

Formula:

• GST on Gold = (Price per gram) × (Number of grams) × 3%

Example:

• If you’re purchasing 10 grams of gold priced at ₹4,500 per gram:
  • Total cost of the gold = ₹4,500 × 10 = ₹45,000
  • GST on the gold = ₹45,000 × 3% = ₹1,350

The total price, including GST, will be:

• ₹45,000 + ₹1,350 = ₹46,350

2. How to Work Out GST on Making Charges

If you’re getting jewelry made, there’s a 5% GST on the labor costs, also known as making charges.

Formula:

• GST on Making Charges = (Making Charge per gram) × (Number of grams) × 5%

Example:

• Let’s say the making charge is ₹500 per gram for 10 grams of jewelry:
  • Total making charges = ₹500 × 10 = ₹5,000
  • GST on making charges = ₹5,000 × 5% = ₹250

The total cost for making the jewelry, including GST, will be:

• ₹5,000 + ₹250 = ₹5,250

3. Final Price of Jewelry with GST

To find the full price of the jewelry, add the total cost of the gold (with GST) and the total cost of making charges (with GST).

Formula:

• Total Price of Jewelry = (Gold Price + GST on Gold) + (Making Charges + GST on Making Charges)

Example:

• From the earlier calculations:
  • Total cost of gold (with 3% GST) = ₹46,350
  • Total making charges (with 5% GST) = ₹5,250

So, the full price of the jewelry will be:

• ₹46,350 + ₹5,250 = ₹51,600

1. GST on Gold: 3% is added to the gold price.
2. GST on Making Charges: 5% is added to the labor charges.
3. Total Cost: Add the gold price (with 3% GST) and making charges (with 5% GST) to get the final price.

This helps you calculate how much you’ll need to pay when buying gold or getting jewelry made.

Taxes on Gold Ornaments Under GST Have Changed

Before GST came into effect, buying jewelry meant paying an extra 2% tax, split between 1% service tax and 1% VAT (a tax on goods). After GST was introduced, the taxes changed. Now, you pay 3% on the cost of the gold and 5% on the making charges for any jewelry.

While these rates are slightly higher than before, they’re still lower than the original 18% that was proposed. That rate was cut after public protests. Despite the reduction, gold prices have risen because most of the gold in India is imported, and import taxes have also increased.

In 2019, the customs duty on imported gold was raised from 10% to 12.5%, making it more expensive to bring gold into the country, which raises the price of jewelry.

• Making Charges: These can differ depending on the jeweler. For example, let’s assume they charge 10% of the gold’s value as a making fee.
• GST on Combined Sale: If the purchase of gold jewelry (gold + making charges) is considered as one transaction, the GST rate is 3%, with gold being the main component.

In Summary:

• 3% GST applies to the gold price.
• 5% GST applies to the making charges.
• Customs duty on imported gold increased to 12.5%.

These changes have made jewelry more expensive overall, mostly due to the higher customs duty and the revised GST rate.

GST Exemptions for Gold

On December 22, 2018, the government announced that gold jewelry exporters wouldn’t need to pay GST on the gold they receive from specific approved agencies.

This was done to lower the costs for exporters, making Indian gold jewelry more competitive in international markets. However, this does not apply to regular customers buying jewelry within India, as they still need to pay GST.

GST on Digital Gold

Buying digital gold online is a simpler option compared to physical gold because you don’t have to worry about storing it safely or keeping it secure.

When you buy digital gold, there’s a 3% GST added to the purchase. The seller takes care of paying this tax, so you won’t need to pay any extra GST rate when you decide to sell or redeem your jewelry later. This makes digital gold a more convenient way to invest.

E-Way Bill Rules for Gold

Before September 13, 2022, people didn’t need to use an e-way bill (a document for transporting goods) when moving gold, gold jewelry, or precious stones, regardless of their GST registration. However, after that date, the rules changed, and now a special e-way bill is required for transporting these items.

Input Tax Credits for Gold Businesses

Jewelry makers and gold merchants can claim back the GST they’ve paid on the gold and other materials used in making jewelry. This is called Input Tax Credit (ITC) and helps reduce their tax expenses. Even if they pay GST for services from an unregistered worker, they can still claim this credit, which helps lower their overall costs.

Key Considerations Before Buying Gold

Gold prices can change often due to factors like demand, supply, and currency value, which can affect how much gst you pay when buying jewelry in 2024.

When purchasing jewelry, make sure the precious and semi-precious stones are listed separately on the bill, as they are taxed differently.

Also, always buy hallmarked gold to ensure its quality. While 24-karat gold is the purest, it’s too soft for making jewelry. That’s why most jewelry is made from 22-karat, 18-karat, or 14-karat gold.

Key GST Rulings on Gold

1. Karnataka Ruling – M/s Attica Gold Pvt. Ltd. (2020):
   • Issue: The company bought second-hand gold from people and resold it. The question was whether GST rate should be charged only on the profit (the difference between the purchase price and selling price).
   • Decision: Yes, GST should only be applied to the profit. If they bought the gold for more than they sold it for, no GST would apply.
   • ITC (Input Tax Credit): If the company bought gold from a registered seller, it could claim back the GST it paid. If the seller wasn’t registered, they couldn’t claim this credit.
2. Maharashtra Ruling – M/s Biostadt India Limited (2018):
   • Issue: The company gave away gold coins as part of a promotion for customers who made big purchases. The question was whether the coins were subject to GST.
   • Decision: Yes, the gold coins given in the promotion were subject to GST.

What to Remember Before Buying Gold Jewelry

• Purity: Always buy hallmarked or BIS-certified gold to ensure its quality and authenticity.
• Gold Quality: The price of gold depends on its purity. 24-karat gold is the purest but isn’t often used for jewelry. Most jewelry is made from 22-karat, 18-karat, or 14-karat gold.
• GST on Stones: If your jewelry contains precious or semi-precious stones, they should be listed separately on the bill because they have different GST rates.
• Gold Prices: Gold prices can change daily based on factors like supply, demand, and market conditions, which can affect the final cost of the jewelry.

Conclusion

Gold is subject to different taxes at various stages, so it’s important to understand how these costs work before making a purchase. Talking to an expert can help you calculate the GST you’ll need to pay when buying jewelry.