In this article, we’ll be delving into the taxation of gold in different forms under the Goods and Services Tax (GST). The introduction of GST brought a major change in the Indian taxation system as it subsumed several indirect taxes such as VAT, service tax, and excise duty charged on domestic transactions.
Under GST, a tax on the making charges on gold jewellery was introduced. However, the basic customs duty on the import of gold from other countries and the levy of Integrated Goods and Services Tax (IGST) continue to be collected.
This means that while the making charges on gold jewellery are now subject to GST, the import of gold attracts basic customs duty and IGST. As a result, it is essential for businesses and individuals dealing with gold to understand the taxation of gold in different forms under GST to ensure compliance with the law and avoid any legal repercussions.
What is GST on Gold?
As per the GST law, gold bars or gold jewellery are categorized as ‘Goods’. This means that the supply of gold, without any job work, is considered the supply of goods under Section 7 of the CGST Act. Therefore, GST is applicable to gold as per the following regulations.
| Particulars | HSN Code | GST Rate |
| (1) Precious stones (other than diamonds) and semi-precious stones, whether or not worked or graded but not strung, mounted or set(2) Ungraded precious stones (other than diamonds) and semi-precious stones, temporarily strung for convenience of transport (includes synthetic or reconstructed stones, apart from unworked or simply sawn or roughly shaped) | 7103, 7104 | 0.25% |
| Diamond, gold, pearls, silver, or articles of jewellery of silver or gold, and so on, including synthetic or reconstructed stones, unworked or simply sawn or roughly shaped | 7101, 7102, 7106, 7107, 7108, 7109, 7111, 7113, 7114, 7116, 7118 | 3% |
| Job work in relation to cut and polished diamonds, plain or studded jewellery of gold, silver and so on | 9988 | 1.5% |
GST rates on gold purchase and GST on gold making
With the implementation of GST, several indirect taxes such as VAT, service tax, and excise duty were subsumed, and a new tax on the making charges of gold jewellery was introduced. However, the basic customs duty on gold imports from other countries and the levy of IGST continue to be collected. The article also provides the latest updates on GST regulations related to the movement of gold, gold jewellery, and precious stones.
The GST rates for gold depend on the HSN code and the nature of the transaction. The article provides a table with the applicable GST rates for various categories of gold and precious stones. When it comes to the sale of gold ornaments or jewellery to consumers, it is considered a composite supply of goods and services, and the GST rate of 3% is levied on the total value of the jewellery. The making charges or value addition is considered job work, and if carried out by unregistered goldsmiths, the gold merchant or jeweller must pay GST at 5% on a reverse charge basis. Repair works on jewellery also attract GST at a rate of 5%.
The article also discusses the GST registration threshold limits and composition schemes available for businesses in gold mining and distribution. Moreover, it clarifies that unregistered individuals selling or exchanging gold jewellery at jewellery shops are not liable to pay GST, as it is not considered a furtherance of business. However, GST applies to second-hand gold jewellery purchased and sold by gold dealers or companies under certain conditions.
GST Calculation on Gold
When computing the GST on gold items like jewelry, ornaments, coins, biscuits, bars, or purchases, the price takes into account the cost of extracting and processing the gold, along with the profit margin, but not the making charges. However, in the case of gold jewelry, the price also includes making charges. Prior to June 30, 2017, taxes such as VAT and service tax were imposed on the price of these items. Post the introduction of GST, the calculation method for these taxes has undergone changes.
To illustrate the impact of GST, let’s consider an example of imported gold jewelry and compare its prices pre and post-GST. This will help us understand the difference between the pre-GST and GST regimes for gold items.
| Particulars | Before GST(₹) | Under GST (Not as a composite supply)(₹) | Under GST (As a composite supply)(₹) |
| Base price of 10 gm gold (Assumed) | 1,00,000 | 1,00,000 | 1,00,000 |
| Add: Basic customs duty (10%) | 10,000 | 10,000* | 10,000* |
| Assessable value for service tax | 1,10,000 | 1,10,000 | 1,10,000 |
| Add: Service tax (1%) | 1,100 | Nil | Nil |
| Assessable value for VAT | 1,11,000 | 1,10,000 | 1,10,000 |
| Add: VAT ( 1%**) | 1,111 | Nil | Nil |
| Assessable value for GST | 1,12,111 | 1,10,000 | 1,10,000 |
| Add: GST on gold at 3% | Nil | 3,300 | — |
| Total value of gold | 1,12,111 | 1,13,300 | 1,10,000 |
| Add: Making charges at 10%^ (On base price+customs duty) | 5,500 | 5,500 | 5,500 |
| Assessable value for GST | 1,17,611 | 1,18,800 | 1,15,500 |
| Add: GST on making charges at 5% | Nil | 275 | — |
| Add: GST on gold jewellery at 3%^^ (For composite supply) | — | — | 3,465 |
| Total value of gold jewellery | 1,17,611 | 1,19,075 | 1,18,965 |
Impact of GST on Gold
After comparing the prices before and after the implementation of GST, we can observe an approximate 1.1% price hike, amounting to Rs 1,354. This increase is primarily due to the higher GST tax rate on pure gold or gold bars, which has gone up from 2% to 3% under the GST regime.
Moreover, the introduction of GST has brought the making charges of gold items under the tax ambit, which was previously not included in the earlier indirect tax system. This inclusion of making charges has also contributed to the overall rise in prices.
In addition, the budget of 2019 has raised the customs duty on imported gold bars from outside India to 12.5%, from the earlier rate of 10%. This change has further contributed to the increase in the prices of gold items.
