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Latest GST on Gold
Shambhavi Sharma / 2021-04-07 10:59:02The Goods and Services Tax had a major impact on the demand for many items, including gold. Gold is one of the few products that is subject to varying GST rates at various stages of its life cycle, from purchase to manufacturing. As a result, the GST on gold refers to both the availability of gold and the production of gold ornaments. Individuals interested in purchasing gold should learn more about the gold GST rates and their implications.
Impact
The value of gold has risen by around 0.75 percent since the introduction of GST. Prior to the GST, gold was taxed at a rate of 2%. (1 percent as VAT and 1 percent as Service Tax).
The government has announced that gold purchases would be subject to a 3% GST. However, the GST rate will vary depending on the type of gold, the mode of trade (domestic/imports), and the industries involved (unorganised or organised).
On Import- Gold's rising price has decreased demand and impacted the liquidity of investing in this precious metal. Regardless, benefits such as the Free Trade Agreement with South Korea have allowed GST-registered importers to ship gold without having to pay an additional 10% customs duty.
On Ornaments- The 2020 GST on gold jewellery corresponds to a 5% fee on producing charges. GST on gold jewellery is usually charged as a fixed charge or as a fixed percentage of the gold value. As a result, making charges also differ between jewellers, influencing the GST on gold coins and ornaments.
On Organised and Unorganised Sector- Gold dealers who takes GST Registration are required by the GST system to keep track of all transactions. It is intended to boost all segments of the sector's accountability and transparency. Notably, only 30% of this industry can be classified as organised. As a result, it's feared that a high rate would entice traders to smuggle gold or sell it without a proper bill.
Aside from the GST on gold, other factors such as high liquidity, low gold mining, and a rise in foreign rates all contribute to higher gold prices. As per Union Budget 2021, gold, now, attracts 12.5% import duty and 3% GST, which gives a total of 15.5%. The custom duty on gold has been reduced from 12.5% to 7.5%.
GST on Gold Exemptions
On the 31st GST council meeting, a GST exemption was declared on gold supplies made by a notified entity to licenced jewellery exporters. The aim of this exemption is to lower the GST burden on gold jewellery exporters and make India's gold export sector more competitive in the global market. Making charges are taxed at a rate of 5%, but licenced jewellers can demand a 2 percent Input Tax Credit on these costs. The exemption, on the other hand, is intended to provide relief to gold jewellery exporters; domestic consumers would not profit from it.
GST Calculation on Gold
It should be noted that in this industry, a standard invoicing pattern is not followed, resulting in different billing systems among jewellers. Each region, however, has a jewellery association that publishes the gold rate every morning.
The final price of jewellery is usually calculated using this simple formula –
Price of gold X Weight in grams + Making charges + GST applied at 3% on the (price of jewellery + making charges)
Factors to Consider before buying Gold
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The cost of gold is determined by the fineness of the gold used. Although 24 Karat (24KT) gold is the highest quality available, it is not suitable for jewellery making. 22KT, 18KT, and 14KT gold are commonly used in jewellery. Gold of lower quality has a lower per gramme price and a lower GST rate.
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Make sure the bill shows the value of any precious/semi-precious stones in the jewellery separately. Under the GST, these items can be taxed differently.
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To ensure the authenticity of the gold, buy hallmarked/BIS certified jewellery.
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The gold rate, or price of gold, fluctuates on a regular basis depending on a number of factors, and this can affect the GST on gold jewellery that applies to your transaction (usually marginally).
