Good and Service Tax, popularly termed as GST is the tax levied on the supply of goods, services, and sometimes both. GST was introduced by the Indian Government in July 2017. The GST charges vary according to the stage of the product from the manufacturing stage to the final product.
Talking about gold, in India, GST is applied both on manufacturing gold and servicing it. GST on gold is to be paid when the buyer purchases the gold. Similarly, if anyone is purchasing gold jewellery, GST is paid for the making charges. On the other hand, if anyone is selling old jewellery and looking forward to purchasing new gold jewellery, then the individual would be exempted from paying GST on gold jewellery. In short, if you are exchanging your old gold jewellery for a new one, you are surely saving on GST.
Taxes on Gold before GST:
Before the application of the GST rate on Gold, apart from customs duty, people only had to pay the VAT that is Value Added Tax and Excise Duty which was 1.2% and 1% respectively at the time of purchasing gold. There were no other charges levied on the making charges. But if you are looking to exchange your old jewellery by purchasing a new one, you surely had to pay 3% tax.
How to Calculate GST on Gold?
Before working on how to calculate GST, let’s learn about the different GST rates levied on gold.
- When using gold for making new jewellery, the gold GST rate is 3%.
- 5% GST is to be paid on the making charges when you purchase new jewellery.
- On importing gold, 10% GST is to be paid in the form of Custom duty.
For understanding how GST is calculated on gold and gold jewellery, let’s take an example here.
Suppose the price of gold is Rs.40,000 per ten grams, which makes Rs.4000 per gram, and the making charges are 10%. The gold rates after adding GST would be Rs.1,00,000 for 25 grams’ gold. The custom duty which is 10% would come to Rs.10,000, and the GST would be Rs.3300 at 3%. Henceforth, the total price of gold after calculating the tax on gold in India would come to Rs.1,13,300.
How to Calculate GST on gold jewellery?
For calculating GST on gold ornaments, let’s carry on the same example or price used for the purchase of gold. The price of one gram of gold is Rs.4000. The GST on the making charges is 10%. So, the price of 25 grams’ gold would be Rs.100000, the customs duty comes to Rs.10000 at 10%, GST is Rs.3300 at 3%, and making charges would be Rs.11000 at 10%, GST on making charges at 5% comes to Rs.550. The total amount would come to Rs.1,24,850 for 25 grams of gold jewellery.
Hence, this is how GST on gold purchase and jewellery purchase is calculated in India. The GST rate on gold ornaments is quite different from the GST rates on raw gold which should be noted. When purchasing gold jewellery, it should be understood that the GST on the stone would be different from the gold. And this should be checked along with the GST charges at the time of billing. If one is aware of the types of taxes on gold, it is much easier to calculate the GST rates while purchasing raw gold and gold jewellery.
Considering the current scenario, the increased tax rates on gold and the GST on the making charges reach around 1% to 2% increase in the total cost of the final product. This marginal addition is as per the government’s policy for reducing the deficit in the accounts of the country. By introducing the gold GST rate in India, the Indian government wants to introduce complete transparency in the accountability and organized sector in the unorganized sector.
The Indian government has already issued a list of banks, both private and public that are exempted under the plan “export against supply by the nominated agency”. The banks listed in this list are exempted from paying any amount of GST on gold that is imported. This exemption has been a great relief for various notified agencies dealing in gold. Apart from this, the rates of gold remained unaffected for other vendors.
It can be concluded that GST has surely increased the prices of gold for the end customers. The tax which was priory 2% on the gold jewellery rates, has now increased to 3%. No doubt, GST was introduced to bring accountability and transparency in the gold sector, but it has also invited unexpected results. Vendors are looking to the unauthorized gold markets and importing gold illegally or illegal smuggling of gold, particularly from the middle east which was not expected.
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