Table of Contents
1. What is GST on Gold?
GST on Gold refers to the Goods and Services Tax (GST) applicable to the supply of Gold in India. Gold attracts a specific rate of GST, which the government determines. As of my knowledge cutoff in September 2021, the GST rate on Gold was 3%. However, it’s important to note that GST rates are subject to change, and it’s advisable to refer to the latest GST notifications or consult with tax authorities for the most updated information on GST rates applicable to Gold.
| Particulars | HSN Code | GST Rate |
|---|---|---|
| (1) Precious stones (other than diamonds) and semi-precious stones, whether or not worked or graded but not strung, mounted or set (2) Ungraded precious stones (other than diamonds) and semi-precious stones, temporarily strung for convenience of transport (includes synthetic or reconstructed stones, apart from unworked or simply sawn or roughly shaped) | 7103, 7104 | 0.25% |
| Diamond, gold, pearls, silver, or articles of jewellery of silver or gold, and so on, including synthetic or reconstructed stones, unworked or simply sawn or roughly shaped | 7101, 7102, 7106, 7107, 7108, 7109, 7111, 7113, 7114, 7116, 7118 | 3% |
| Job work in relation to cut and polished diamonds, plain or studded jewellery of gold, silver and so on | 9988 | 1.5% |
2. GST Rates on Gold Purchase and Making Charges
GST rates on gold purchase and GST on gold making can vary based on the specific nature of the transaction and the services involved. Here is a summary of the applicable GST rates:
2.1. GST on Gold Purchase:
- The GST rate on the sale of gold ornaments or jewellery to the commoner is 3% of the total value of the transaction.
- This rate applies regardless of whether the making charges are shown separately.
2.2. GST on Gold Making Charges:
- Making charges for gold jewellery is considered a supply of services and attracts a GST rate of 5%.
- If the goldsmith or specialist carrying out the job work is registered under GST, they will charge GST at 5% on the making charges.
- If the goldsmith or specialist is not registered under GST, the gold merchant or jeweller must pay GST at 5% on a reverse charge basis.
2.3. GST on Second-Hand Gold Jewellery:
- Dealers or gold companies purchasing and selling second-hand gold jewellery are required to charge GST on the value of such Gold.
- The calculation of GST on second-hand gold jewellery is done as per Rule 32(5) of the CGST Rules.
2.4. GST on Repair Works:
- Repair works on jewellery are considered making charges and are subject to GST at a rate of 5%.
It’s important to note that GST rules and rates may be subject to change. It is advisable to refer to the latest GST notifications or consult with tax authorities for the most up-to-date information on GST rates applicable to gold purchases and Gold making charges.
3. GST Calculation on Gold
| Particulars | Before GST (₹) | Under GST (Not as a composite supply) (₹) | Under GST (As a composite supply) (₹) |
|---|---|---|---|
| Base price of 10 gm gold (Assumed) | 100000 | Base price of 10 gm gold (Assumed) | 100000 |
| Add: Basic customs duty (10%) | 10000 | Add: Basic customs duty (10%) | 10000 |
| Assessable value for service tax | 110000 | Assessable value for service tax | 110000 |
| Add: Service tax (1%) | 1100 | Add: Service tax (1%) | 1100 |
| Assessable value for VAT | 111000 | Assessable value for VAT | 111000 |
| Add: VAT ( 1%**) | 1111 | Add: VAT ( 1%**) | 1111 |
| Assessable value for GST | 112111 | Assessable value for GST | 112111 |
| Add: GST on gold at 3% | Nil | Add: GST on gold at 3% | Nil |
| Total value of gold | 112111 | Total value of gold | 112111 |
| Add: Making charges at 10%^ (On base price+customs duty) | 5500 | Add: Making charges at 10%^ (On base price+customs duty) | 5500 |
| Assessable value for GST | 117611 | Assessable value for GST | 117611 |
| Add: GST on making charges at 5% | Nil | Add: GST on making charges at 5% | Nil |
| Add: GST on gold jewellery at 3%^^ (For composite supply) | — | Add: GST on gold jewellery at 3%^^ (For composite supply) | — |
| Total value of gold jewellery | 117611 | Total value of gold jewellery | 117611 |
When calculating GST on gold jewellery, gold ornaments, gold coins, gold biscuits, gold bars, or gold purchases, the price includes the cost of extracting and processing the gold and the profit margin. However, making charges are not included in the price. Before GST was implemented, taxes such as VAT and service tax were levied on the price of gold. To illustrate this, let’s consider an example of imported gold jewellery and compare its prices before and after the introduction of GST:
- Before GST (pre-GST):
- Customs Duty: 10%
- VAT/Service Tax: Varies by state/UT (assumed to be 1%)
- Making Charges: Varies by a jeweller (assumed to be 10%)
- After GST:
- Customs Duty: Increased to 12.5% (as per the Finance Act 2019)
- GST Rate: 3% (considering the supply of gold jewellery as a composite supply with gold being the principal supply)
It’s important to note that making charges and GST rates may vary depending on the jeweller and the state/UT.
5. Impact of GST on Gold
The implementation of GST has had several impacts on the gold industry. Here are some key points regarding the impact of GST on gold:
- Uniform Tax Structure: GST has replaced multiple indirect taxes such as VAT, excise duty, and service tax, creating a uniform tax structure across the country. This has simplified the tax system for the gold industry, reducing complexities and ensuring consistency in tax rates.
- GST Rates: Gold attracts a GST rate of 3%, which replaced the earlier taxes. This has helped streamline the taxation process for gold transactions and has brought about greater transparency.
- Input Tax Credit (ITC): GST allows businesses to claim the input tax credit on the taxes paid on their inputs. Gold industry players can avail of ITC on various inputs like gold bars, machinery, raw materials, etc. This helps reduce the overall tax liability and promotes cost efficiency.
- Organized Sector Promotion: GST implementation has encouraged the formalization of the gold industry. Ensuring compliance and proper documentation has pushed businesses to operate within the legal framework, promoting transparency and accountability.
- Impact on Prices: The introduction of GST initially had some short-term impact on gold prices due to uncertainties and adjustments in the market. However, the market stabilized over time, and gold prices were primarily influenced by other global factors rather than GST alone.
- Compliance Challenges: The implementation of GST brought certain compliance challenges for the gold industry, such as maintaining proper records, filing regular returns, and adapting to the new tax system. However, these challenges have been gradually addressed through awareness programs and the simplification of processes.
Overall, GST has aimed to bring transparency, efficiency, and a standardized tax structure to the gold industry. While initially posed some challenges, it has helped streamline operations and promote a more organized and compliant sector. This allows businesses that export gold jewellery or other gold products to import gold without paying GST.
6. Popular Advance Rulings on GST on Gold
6.1. Karnataka AAR in the case of M/s Attica Gold Pvt. Limited in order KAR/ADRG/15/2020 dated 23rd March 2020:
6.1.1. Matter/Issue:
- Valuation: Is GST charged only on the difference between the selling price and the purchase price in the case of the second-hand purchase of gold from unregistered individuals without changing the type/quality of the goods?
- ITC Claim: Can the company claim Input Tax Credit (ITC) if purchases are made from a dealer to whom the margin scheme applies?
6.1.2. Ruling:
- Valuation: If the company raises an invoice for second-hand goods or deals with it without any change in form/type, the valuation will be as per Rule 32(5) of the CGST Rules. GST is levied on the difference between the selling and purchase prices, provided it is positive. If the purchase price exceeds the selling price, no GST is charged. Non-availability of the input tax credit is an additional condition.
- ITC Claim: If second-hand gold jewellery is purchased from a registered person, ITC is available. The margin scheme will not apply to the gold company on further sales.
6.2. Maharashtra AAR in the case of M/s Biostadt India Limited in order GST-ARA-72/2018-19/B-165 Mumbai dated 20th December 2018:
6.2.1. Matter/Issue:
- ITC Claim: Can input tax credit be availed on the procurement of gold coins used for sales promotion?
- ITC Claim for similar schemes: Whether ITC is available for any other similar schemes?
6.2.2. Ruling:
- ITC Claim: ITC is unavailable for purchased gold coins used in sales promotions. The distribution of gold coins is not the principal business of the taxpayer company, and it falls under the category of a ‘gift’ as per Section 17(5) of the CGST Act.
- ITC Claim for similar schemes: ITC is not available for other similar schemes.
What is the GST rate on gold?
The GST rate on gold is 3% for selling gold jewellery, including making charges or any other form of gold.
Is GST applicable on making charges for gold jewellery?
No, the GST rate of 3% applies to the total value of gold jewellery, including making charges. The making charges are considered part of the composite supply of goods and services.
Are there any exemptions or concessions for gold under GST?
No, there are no specific exemptions or concessions for gold under GST. The standard GST rate of 3% applies to the sale of gold jewellery.
Do I need to pay GST on second-hand or used gold jewellery?
Yes, if dealers or gold companies purchase and sell second-hand gold jewellery, GST applies to the value of such gold calculated as per the GST rules.
Is GST charged on gold bars, gold coins, or gold biscuits?
Yes, the GST rate of 3% applies to the sale of gold bars, coins, biscuits, or any other form of gold.
Can I claim an input tax credit (ITC) on purchasing gold?
Input tax credit (ITC) is not available to purchase gold used for making jewellery. The GST paid on gold cannot be claimed as a credit against other GST liabilities.
Do I need to generate an e-Way bill for the transportation of gold?
Yes, an e-Way bill is required for the interstate movement of gold if the value of the consignment exceeds Rs. 50,000. The e-Way bill rules and requirements must be followed for the transportation of gold.
Is GST applicable on gold imported into the country?
Yes, GST applies to the import of gold into the country. The applicable GST rate and customs duties will be levied on the imported gold.