How is GST on Gold Calculated?

How is GST on Gold Calculated?

After GST implementation, both services and goods have been affected in India. One of the important products to get affected is gold. The taxation regime has impacted the gold business at various levels, including the manufacturing and the import market. The goods and service tax imposed a new regime in the purchase of goods and services in the Indian market since 2017.

By shifting to single-point taxation, the government plans to offer uniformity to the services and eliminate the problem of compound taxation.

In the case of gold, the government imposes GST on both service and supply. Customers have to pay taxes on purchasing and making gold items. Being an import item, it has a custom duty. So, it is better to know the details of the applicable rate when planning to invest in gold or purchase gold jewelry from the market.

Understanding GST on Gold

Reports show an increase in gold imports in March 2021. It also indicates the rising demand for gold, and in a way, the economy is able to recover. However, investing in gold and any gold commodity is subject to taxes. The customers have to pay a 3% GST on gold in India with an additional 5% of the manufacturing cost. The import, manufacturing charge, and purchase are included in GST on buying gold. However, the GST can be exempted when exchanging gold jewelry. One should be careful when buying gold jewelry items about the price of old and new items and the weight of each product. This can ensure that you get what you pay for.

The huge consumption of gold in India is mainly through its jewelry market. The raw gold is used in huge amounts for making ornaments imported to the country. Post the new tax implementation, it became 18%, leading to protests. Now, it has become 3% GST on gold with 5% on making charges.

What is the Gold Price Before and During GST?

The price of pure gold and gold bars is influenced by gold processing fees, extraction, and profit margin. Tax impacts the products; however, the import market has not been affected due to changes in demand for other precious metals. The import duty is still considered at 10%.

Currently, there is 3% GST on gold and its related jewelry, with 5% charging and 7% on import duty. Therefore, the total GST and duty charges on pure gold are 10.5% of its price.

How GST Impacts Gold?

After the implementation of the new tax rate on gold items, it has become expensive to purchase as a precious metal option. This is how gold prices are soaring high across the market.

So, let us see how the change in the tax rate affects gold on different levels.

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Changes in Gold Importation 

Due to the rising price of the precious metal, there is a decrease in its purchase. It has also affected the liquidity of gold investments. With the free trade agreement, the importers following suitable GST registration are allowed to ship gold without paying the additional customs duty of 10%.

Impact on Organizational and Non-organizational 

With the change in the tax system, the gold dealers should have a record of all the transactions. The industries can benefit from increased transparency and accountability of transaction details. In case the rate remains too high, the vendors can smuggle or sell without the need for a suitable bill.

Tax Calculation on Gold Ornaments 

Before the tax revision, gold was available at a 2% premium to consumers, in which 1% would go to service tax and another 1% to value-added tax. Other than this, customers have to pay an additional 3% on the gold rate with 5% on its manufacturing rate after tax implementation.

Therefore, the overall rates are high but have been lowered to public pressure after the government announcement of 18 percent. The GST implementation has increased gold prices due to the increase in gold imports in India. Before the introduction of the GTS, no GST was imposed on the making charges of jewelry. Knowing the percentage details of GST on gold and its making charges is important before you order it. The jewelry shop should offer details of the GST and other charges imposed and maintain transparency.

Exemption of GST on Gold

The Indian government has listed some public and private sector banks that cannot come under the scheme for export against supply. As per this, the listed banks don’t have to pay GST on imported gold. It is as per the list made by nominated agencies, though the new gold rate has been unaffected for the vendors.

Things to Know Before Buying Gold Ornaments 

  • Price of gold – The gold price depends on its weight and purity at the time of its purchase. The price changes daily, and checking the rate before investing in it is important.
  • GST on gold – The GST on gold varies from GST on other precious stones available in the market. The GST charges should be mentioned in detail in a purchased bill.
  • Purity of gold – It is vital to check gold’s purity at the time of its purchase. The hallmark of a product says it all. A 24K gold jewelry is the purest form of gold to purchase.

Check the market rate and calculate GST on gold in India when planning to buy it from the market. So, when selling old gold or purchasing new in exchange for your old gold, you can avoid the GST on the purchased item.

How is GST on Gold Calculated

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