The Goods and Services Tax (GST) is a value-added tax levied on the supply of goods and services in India. It was introduced on July 1st 2017, and is subsumed under the existing Central excise duty, service tax, value-added tax (VAT), central sales tax, entertainment tax, luxury tax and other taxes.
Gold is one of the few products subject to varying GST rates at various stages of its life cycle, from purchase to manufacturing. The Indian government levies GST on both the manufacturing and the services of gold. However, if a person sells old gold and uses the money to buy new jewellery, they do not have to pay taxes.
GST on gold jewellery in India is levied at 3% on the value of the jewellery. However, there is no GST on raw gold. The GST on gold jewellery is calculated based on the value of the jewellery, which includes the cost of the gold, the making charges and the value-added tax. However, GST on gold jewellery does not apply to selling old gold jewellery. But it applies to the sale of new gold jewellery.
GST does not apply to the sale of silver jewellery, platinum jewellery, or American Diamond jewellery. There are several reasons for levying GST on gold jewellery. For instance:
- The main reason for the levy of GST on gold jewellery is to ensure that the unorganized sector does not have an unfair advantage over the organized sector.
- The other reason for the levy of GST on gold jewellery is to bring the gold jewellery sector under the ambit of GST. The GST on gold jewellery is a positive step as it will bring the unorganized sector under the tax net.
- The GST on gold jewellery is expected to help check the black money in the economy and curtail the adulteration of gold jewellery.
Did you know that gold is also subject to Customs Duty since it is an imported commodity? The revised GST on gold tax slabs declared on June 3rd, 2017, was set at a rate of 3%. It means that all gold items, both completed and unfinished, are subject to a 3% fee, and paid by the buyer, i.e., the end-user. Over and above the customs duty of 10% and GST of 3%, a 5% surcharge was added as making charges. It increased the cost of gold jewellery as against the pre-GST period when there were no additional charges on gold jewellery. Fortunately, the jewellery industry and other regulating bodies could convince the government to reduce gold-producing charges to 5%.
Pre and post-GST on gold jewellery
There is a difference between GST on gold jewellery and on precious and semi-precious stones used in the jewellery. It would help to be aware of this difference to ensure you are not taxed on the stones. The 3% tax is on the metal value, and the 5% is on the labour, i.e., the making charges. Earlier, the industry levied a Value Added Tax (VAT) of 1.2% and 1% as Excise Duty over and above the Customs Duty. But, you were not taxed on the labour charges. If you sell old gold jewellery to buy new ones, you are required to pay a fee of 3%.
Learn how to calculate GST on gold jewellery
Suppose you want a gold chain or any other gold jewellery, the GST will be calculated thus:
The price of the gold in grams is the same before and after GST, i.e., INR 5194.00 per gram. Customs duty is added to the gold before and after GST at 10%, i.e., INR 519.4 per gram. A Service Tax of 1% is levied on gold jewellery in the pre-GST time, whereas no service tax is included in the post-GST period. The value-added tax was levied at 1.2% only before GST began to be applied. Making charges remains the same before and after GST, which is 10%, with an additional 5% making charges after GST. Overall, you now have to pay a GST of 3%.
For further clarity, take an example of buying a 10gm-gold chain.
| Price of gold jewellery | Before GST | After GST |
| Price of 10 grams of gold | 51,940 | 51,940 |
| Customs duty | 5194 | 5194 |
| Service Tax @1% | 571.34 | 0 |
| GST @3% | 0 | 1714 |
| VAT @1.2% | 686 | 0 |
| Making charges above 10% | 5713.4 | 5713.4 |
| GST on making charges @5% | 0 | 2857 |
| Total cost of 10-gm gold chain | 64105.00 | 67418.00 |
Now that you know how to calculate the GST on your gold jewellery, it should help you work out the value of your investment. It is all the more reason to find licensed jewellers like CaratLane to ensure that you have the purest of metals, as they are worth their weight in gold!
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