Apart from the regular tax slab, the GST council has decided 3 percent GST on gold. It is a positive move towards the jewelry association and their growth as the sector was demanding lower tax rates earlier. This was a positive move towards cooperation as the industry was aching with higher tax burden and the lower tax rates will give definitely give a boost towards a friendly approach with customers of this precious yellow metal. According to the latest data, gold rates after GST are under control as the commodity market shows Gold Spot Price/10 grms at 27772.0 with stability.
Latest Update in GST Impact on Gold Industry
19th May 2023
- Karnataka AAR has ruled that second-hand gold, such as jewellery and its parts that are purchased from an unregistered individual, and sold to a registered or unregistered dealer, after melting it into lumps of gold, is not subject to GST. Read more
24th November 2021
- The Indian government plan to increase the GST rate from 3% to 5% on gold jewellery. The move will likely disturb the already struggling industry after the covid lockdowns and customer non-responsiveness. Tanya Rastogi, Director, Indian Bullion Jewellers Association, said “the proposed move to hike in GST rate if implemented, will encourage the parallel economy and hinder the recovery of the long-suffering industry. As it is, India is one of the most expensive places to buy gold and the proposed hike in duty will make it even more expensive, she said”
Gold Price After GST Through a Table Presentation
| Before GST | After GST | ||
|---|---|---|---|
| A. | Price of gold (100 gm 995, in Rs) | 2,63,636 | 2,63,636 |
| B. | Customs duty (10%) | 26,364 | 26,364 |
| C. | A+B | 2,90,000 | 2,90,000 |
| D. | Excise (1%) | 2900 | 0 |
| E. | C+D | 2,92,900 | 2,90,000 |
| F. | VAT (1.2%) | 3515 | 0 |
| G. | E+F | 2,96,415 | 2,90,000 |
| H. | GST (3%) | 0 | 8700 |
| I. | G+H | 2,96,415 | 2,98,700 |
| J. | Making charges (12% of gold price + customs) | 34,800 | 34,800 |
| K. | I+J | 3,31,215 | 3,33,500 |
| L. | Making Charges GST (5%) | 0 | 1740 |
| Total Price of Jewellery (K+L) | 3,31,215 | 3,35,240 | |
| Total taxes and duties (B+D+F+H+L) | 32,779 | 36,804 |
While calculating some basic math over bullion and its price impact, it is learned that the effective hike over the current prices of gold came at 3.24 percentage points, which is considered healthy for the sector. Currently, gold dealers are paying 1 per cent excise and 1.2 percent value-added tax (VAT) and along with the 10 per cent customs duty on gold. This calculation comes out to 12.43 percent. Now after the introduction of GST at three per cent for gold and 5 per cent for making charges, while keeping customs at 10 per cent, the final rate comes at 2.67 per cent. So, the difference in the price of gold after GST will be close to 3.24 percent from the current one.
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It is also known that chief economic advisor’s report revealed of INR 10,800 crore subset over gold which will take added benefits over the gold dealing and make a win-win situation for the jewelry dealers. Currently, the GST council haven’t declared any service tax over the making charges which leads to the 5 percent tax bracket prevailing at present.
A point of the standard billing system is also under scanner by the industry and seeks for the implementation of a standardized billing system due to the various billing formats in operation by the jewelry traders. As per the international rules and regulations, making charges, wastages, and stones, among other things, must be presented in the invoice in a sperate section.
Still, the industry has accepted the government’s decision, hoping for a positive change but, this also results that there is no customs duty cut likely. It hints that the government does not want to make any provisions regarding the customs duty on gold right now given the price structuring of the sovereign gold bond, which includes 10 percent duty but excludes VAT.
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As some of the states which were demanding rates at five percent for gold under GST, the industry could not have expected anything better than this. Under the current three percent rate, gold will be still a charm for everyone. The India Bullion and Jewellers which demanded a no interference with current tax structure has been accepted by the government with no conditions.
India saw a good rise and demand for gold up to 37% in the month of April to June. World Gold Council stated in his report that India purchased a total of 167.4 tonnes of gold in the quarter, while in the same quarter it was around 122.1 tonne of gold previous year. The price of the gold was 33090 crore in the previous quarter while this time it was priced around 43600 crores.
GoM Decides to Levy 3% GST on Old Gold & Jewellery
The group of ministers has to take the decision on charging the tax on old gold and other jewellery and precious stones so as to ensure that there is no tax evasion by the jewellery smugglers as traders. However, some states are against but some are with the decision that is charging the tax on old gold.
Multiple states have ensured that they will be levying tax on the gold but many other states have denied the same fact. It is to be seen the final decision taken on the central level.
Exports in Trouble Due to GST on Gold
GST on gold for procuring it from allocated agencies have made it difficult for the jewellery industry to cope as the 3% GST is said to be heavily imposed.
Gem and Jewellery Export Promotion Council (GJEPC) Chairman stated that “Government has given relief to nominated agencies for not paying IGST upfront on gold import on submission of the bond. But there is still implication of 3 percent GST on the exporter for procuring gold from nominated agencies which from time to time the council has represented to government. This is hampering gold jewellery exports from India.”
The chairperson also pleaded for the acceleration of refund process as the export industry needs capital for daily work process and issues in refunds leads to bigger problems in daily work schedule.
The implication of 3 per cent GST on gold has created an issue within the gold industry and needs an immediate call to action over it. The GST on gold has led to a reduction in exports within the domestic tariff area.
