Impact of GST on jewellery
Abhishek Kumar / 2020-01-30 06:07:17
It is most likely for all of us to know that GST on gold as a good and GST as jewellery attracts 2 different kinds of rates.
1- GST as Gold: - 3%
2- GST as jewellery: - 5% (making charges)
So here we see that in terms of gold GST charges additional tax on services. Let us learn further about the impact of GST on gold rates
#What is the impact of GST on gold?
Before GST the gold rates were:
•1% service tax
Total of 2% charged upon 10% off import duty
But after GST, the taxes were increased by 3.5% finalizing to 3% of GST levied upon 10% of import duty. This caused the physical demand for gold to decrease. This had a huge impact on the gold market which resulted in a decrease in sales.
#Impact on gold making charges after GST
Before the implementation of GST, the council decided to keep the making charges as 18% but after the implementation, they came to a final rate of 5%
#Impact on the organized sectors
It is observed that approximately 30% of the gold traders are from the organized sectors. GST is believed to provide transparency and accountability but due to the increase in the tax rates, there might be possible chances that the organized sectors might shift into smuggling gold for cheaper rates without proper invoice hence moving to the unorganized sector. This might result in a downfall in the economy
#Impact on the unorganized sector
Approximately 700 to 800 tons of gold is imported to India every year and out of this a significant amount of gold is illegally sold to other countries without the specified amount of tax paid.
After the increase in GST rates, the chances of smuggling have also increased and all this gold will come under the unorganized sector from which the taxes cannot be obtained.
Before the implementation of GST, the gold sector expected the import duty to decrease so as to decrease the unorganized smuggling of gold but unexpectedly the rates were increased.
#Impact on gold import
It was observed that gold imported to India consisted of 25 tons of gold from South Korea in the month of July and August. This show that the gold traders are making the most advantage out of the new implementation which allows them to import gold from South Korea without paying a 10% of customs duty according to the free trade agreement with South Korea
With an increase of tax rate in gold, there will be a noticeable hike in smuggling which will promote more black money contradicting the reason why GST was implemented in the first place. The current gold tax attracts an import duty of 10% with 3% GST and an additional 5% making charges.