Since its implementation in 2017, Goods and Service Tax (GST) has brought many significant changes in the economy. The most noticeable change was noticed in the price of various goods and services.
For instance, gold ornaments are one of the few items that feature GST at different rates. While GST on gold is levied at 3%, an additional 5% GST is added on gold jewellery. So, if you are planning to buy gold, you should be aware of the impact of GST on gold to make an informed decision.
Following are a few highlights of how GST impacts gold in 2021:
- There is a 3% charge on gold under GST. However, if the gold features additional work, the GST will go up to 5%. In the case of exchanging old gold with new, adjustment of GST is made according to the purchase.
- Any changes to the old jewellery or even making a new one will attract 5% GST. This also includes gold polishing.
- No GST is applicable for old gold resale if the buyer intends to purchase new gold jewellery with the money. In simple terms, you need to purchase new gold in exchange for old gold to avoid any tax. Before implementing GST, a tax of 3% was applicable on selling gold even if you intended to buy new gold along with it.
- If you intend to buy from an unregistered supplier, you will be paying taxes on the reverse charge mechanism. Provisions for unregistered suppliers are compulsory to ensure the prevention of illegal gold trading.
GST on gold imports
GST is applicable on the import of gold from one state to another through IGST at 3%. Moreover, international imports do not require GST.
Additionally, in the case of gold imports made from outside India, custom duty at the rate of 10% is applicable. The import of gold in such cases is made in the form of semi-finished, raw, or gold bars. After the process, the cost is passed upon the end-user, and GST is further chargeable on top of customs duty paid by the importer.
Further, to know all about the GST bill, go through the brief highlight of taxes applicable on jewellery manufactured from imported gold:
- 10% customs duty on imported gold
- 3% GST applicable on gold value
- 5% GST for making charges of the jewellery
The 5% GST for making charges on gold varies from one jeweller to another, which further impacts the GST on the purchase of gold.
GST on the gold exemption
Besides the other impact of GST, the tax scheme also introduced an exemption. The notified agency made the exemption to GST-registered exports of gold jewellery.
This exemption helps to reduce the burden of GST on exporters of Indian gold jewellery. It also increases the competitiveness of gold in the global markets. Moreover, this newly introduced GST on gold exemption will also affect domestic buyers.
GST compliance also makes business owners eligible to avail of loans to fund their expenses. Top NBFCs and commercial financial institutions in the country offer high-value business loans to eligible borrowers. Furthermore, certain NBFCs like Bajaj Finserv provide business loans with no collateral and a Flexi loan facility.
If you are an existing customer, you can also avail of pre-approved offers to streamline the loan application procedure. These offers are applicable on various financial products, including business loans, personal loans, etc. To check your pre-approved offer, you simply need to enter a few basic details.
Apart from these, there are certain ways GST affects gold jewellery. These are explained as follows.
Impact of GST on gold from a buyer’s perspective
- Before GST, the tax rate on gold was 2% (1% VAT plus 1% service tax). After the implementation of 3% GST on gold, the marginal price of gold has increased.
- The government is further trying to reduce India’s gold imports and lower the current account deficits.
- This is because India is a net importer of gold, and most of the imported gold is used in jewellery making.
Impact of GST on gold from a seller’s perspective
- A large portion of India’s gold market is unorganised. The transparency has increased with the implementation of GST. However, it is only beneficial for its organised sector.
- Hence, many experts believe that a large number of sellers will move into the unorganised sector to avoid GST on gold sales.
Gold is one of the most solid investments of all time. This tax regime has brought sweeping changes to its organised sector.