Here you will find everything you should know about GST on Gold. For a little over a year now, Goods and Services Tax (GST) has been one of the most talked about topics in the country. Initially, a vast majority of the policymakers were of the impression that a unified taxation scheme was a highly improbable idea.
But, based on the skeleton designed by the outgoing UPA Mk-II, the incumbent NDA government tabled the GST bill during the first quarter of 2017. Fast forward to July 1st, all the kinks with the new and ambitious tax reform were worked out and was officially introduced.
This law basically states that all products from different sectors would be taxed in a unified manner with both Central GST and State GST in play.
In this article, we will deal with GST for gold and how taxation of this metal works.
What is the GST applicable on gold?
Before the new law was unveiled, gold attracted two different taxes: Excise Duty and VAT. While VAT formed 1.5%, excise duties share came up to 1%, totaling a tax of 2.5% on the yellow metal.
Before the bill was unveiled, a large number of market analysts believed that gold would attract a GST of 5%.
However, the apex body led by Finance Ministry and key officials from the tax department ruled that, the metal would incur 3% GST.
Though this is a higher number compared to the previous structure, it is considerably lower to the anticipated numbers.
Are there any other applicable charges on gold?
Yes. As gold is largely imported from European, middle-eastern, and Australian countries, the metal incurs a few import charges.
For instance, there’s a customs duty of 10% while any processing charges will be taxed at 5%. Although, in the previous structure, all taxes and duties came up to 12.4%, the new structure sees duties go up by 1.6% to 14%.
What’s the GST on gold jewellery exchanges?
The newly introduced GST structure is quite extensive and comes with a list of charges in case a person exchanges or has their ornaments repaired.
In this case, gold users will have to bear with double taxation. Let’s assume that a person is looking to exchange their gold, they will then have to pay a GST of 6% and an additional 3% on the new gold they’ve bought.
On the other hand, if they are looking to have their jewellery repaired, they will have to pay an additional 5% on making charges.
Who bears the brunt of exchange/repair costs?
If a customer wants to exchange their gold, they will need to bear the costs themselves, on their own. Let’s understand this with an example:
You are exchanging a jewellery of 10 gm at a rate of Rs.30,000, you will be charged the 3% GST, which comes up to Rs.900, bringing the effective return gold price to Rs.29,100.
On the other hand, if a customer chooses to get their jewellery repaired, they will have to pay a GST of 18% provided that the repairs are made using gold bars.
Also, if the jeweller is outsourcing the repairs, they will also have to pay a GST of 18%, the cost of which will have to be born by the customer.
By the looks of it, the introduction of GST seems to have increased the outlay a prospective gold buyer has to bear.
While on the surface, it seems as though the move could harm the industry, it can actually dissuade jewellers from outsourcing their work to non-registered entities.