Gold ornaments are one of the very few items that feature GST applicability multiple times and that too at different rates. GST on gold as a good is 3%, while in case of gold jewellery an additional 5% GST is applicable on the making charges of the gold ornaments. Thus GST is applicable on both the supply of the good i.e. gold and also the service i.e. manufacture of the gold jewellery by the jeweller.
If you are buying Gold Jewellery: Factors to Keep in Mind
- Ensure that you purchase hallmarked/BIS certified jewellery to ensure purity of the gold
- The price of gold varies based on the fineness of gold used.
- While 24 Karat (24KT) is the highest quality of gold available, it is unsuitable for jewellery making jewellery. Jewellery is usually made using 22KT, 18KT and 14KT gold. Lower quality of gold equals lower per gram price and lower GST on gold.
- Make sure value of any precious/semi-precious stones in the jewellery is featured separately on the bill. These may have different tax treatment under GST.
- Gold rate i.e. price of gold changes daily depending on a variety of factors and this can change the GST on gold jewellery applicable to your transaction (usually marginally).
Comparison of Jewellery Prices before and after GST
|S.No||Costs and Taxes on Gold||Before GST (Rs.)||After GST (Rs.)|
|A||Price of 10 gm gold||25,000||25,000|
|B||Customs Duty (10%)||2,500||2,500|
|D||Service Tax (1%)||275||0 (N/A)|
|F||VAT (1%)||277.75||0 (N/A)|
|H||GST on Gold (3%)||0 (N/A)||825|
|J||Making charges (12% of Gold Price + Customs)||3300||3300|
|L||GST on making charges (5%)||0 (N/A)||165|
|M||Total Price of Jewellery||31,352||31,790|
Impact of GST on Gold
Prior to implementation of GST on gold at 3%, the effect tax rate on the value of gold was 2% (1% VAT + 1% service tax), thus, GST implementation on gold at 3% has increased the price of only marginally for gold buyers. On taking into account, the 5% GST on making charges of gold jewellery, as seen in the above case, the effective increase in taxes is around 2% after GST on gold was implemented, as shown in the table above. This increase in price of gold jewellery is in line with efforts to reduce India’s gold imports and lower the country’s current account deficit. This is because, we are a net importer of this precious metal and a majority of the gold imported is used in jewellery making.
From the seller’s perspective, India’s gold market is largely unorganized, with the organized sector accounting for a relatively smaller portion of the market. Even though introduction of GST on gold has increased the transparency, this benefit is only applicable to the organized sector. As a result, some industry experts believe that smaller jewellers may move into the unorganized sector to avoid paying and charging GST on gold sales.