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GST on Gold – Rate, ITC, E-way bill and exemption

The introduction of GST had a large-scale effect on the majority of goods and services, mainly influencing commodity prices. The price of gold is one of the things that has been impacted by the new taxation regime. The impact was felt at various levels, including gold value, gold jewellery production, and gold imports. Although it was expected that the implementation of GST would bring transparency and accountability to the gold sector, businesses are instead turning to the unorganised gold market and illegally importing raw gold, contrary to expectations.

GST rates on Gold

              3%  GST on the price of gold used in the jewellery

            5%  GST on the making charges

           10% Customs Duty on imported gold

How is GST calculated on gold Jewellery?

The gold value is subject to a 3% GST. In addition, if the gold is imported from another country, the vendors will be charged a 10% customs duty on the gold value. If the gold is used to produce ornaments, a 5% GST is applied to the gold making charges. As a result, the value of jewellery is equal to the gold value plus custom duty, GST, making charges, and GST on making charges.

Availability of Input Tax Credit in the Gold Business

The jeweller can claim Input Tax Credit (ITC) paid on the raw materials used like gold and other job work charges like designing, polishing etc incurred. Also, when the jeweller pays tax on a reverse charge basis (RCM) for supply from an unregistered person or job worker, he can claim the ITC on such tax. For instance, a total of 5% GST is imposed on making charges for jewellery, and if you are a licenced jeweller, you can receive a 2% Input Tax Credit on making charges for jewellery after deducting 3% of GST paid.

Tax Rates on Gold before after GST

Particular

Before GST

After GST

GST Rate on Gold Value

NIL

3%

Sales Tax on Gold Value

1%

NIL

VAT on Gold Value

1%

NIL

Import Duty on Gold

10%

10%

Gold Making Charges

NIL

5%

 

Revised GST Rates on Gold 

Prior to the introduction of GST, gold was subject to a 1% service tax and a 1% VAT (Value Added Tax). As a result, customers were paid an additional 2% on the sale price of gold. When a 3 percent GST was placed on gold, it became more costly. However, there was some relief since gold-making charges were reduced to 5% from 18% prior to the introduction of GST.

GST Calculation on Gold

A standard invoicing pattern is not followed in the gold jewelry sector which results in variation of billing systems among jewellers. However, every city has a jewellery association which declares gold rate every morning. 

Therefore, the final price of jewellery is computed with following basic formula –

Price of gold X Weight in grams + Making charges + GST applied at 3% on the (price of jewellery + making charges)

Check: GST Interest Calculator

Effects of GST on Gold

Presently, the organised gold sector in India comprises around 30%; however, it is believed the high rates of gold will shift the sellers to move to the illegal gold sector and import gold illegally. Further, the gold industry has been affected in the following manner with the implementation of GST.

Impact of GST on gold value: The final consumer's price of gold has risen due to the GST. Since gold was previously subjected to a 2% tax (1% service tax and 1% VAT). Gold, on the other hand, is subject to a 3% GST tax slab.

Impact of GST on gold imports: The illegal smuggling of gold imports has increased significantly since the implementation of GST, especially from the Middle East. Since a 10% import or custom duty is imposed on gold rates, along with a 3% GST, the custom duty on gold imports is increased.

Read Also: New GST Input Tax Credit (ITC) Set-off Rules with examples

E-way bill rules on Gold 

Under GST, e-way bills are required for transportation of goods. Transporting gold in any form, including jewellery, goldsmith's wares, and articles (Chapter 71), does not require an e-way bill. As a result, whether the supplier or receiver of gold is GST licenced or not, gold can be transported without an e-way bill.

GST on Gold Exemptions

31st GST council meeting declared a GST exemption on gold supplies made by a notified entity to licenced jewellery exporters. The aim of this exemption is to lower the GST burden on gold jewellery exporters and make India's gold export sector more competitive in the global market.

This exemption, on the other hand, will provide relief to gold jewellery exporters, however, domestic consumers would not profit from it.

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