With the implementation of the Goods and Services Tax in 2017, there has been a large-scale impact on several commodities and services, particularly affecting their change in prices. Speaking precisely of gold, the government has levied 3% GST on gold jewellery based on its type, imports, and sectors, both organized and unorganised. Individuals should know of the ins and outs of the impacts of GST on gold to make an informed decision when purchasing it.
The impact of Goods and Services Tax on gold
With the introduction of the 3% gold GST rate, it has become an expensive affair to buy gold, especially for the middle-income group citizens. Before this regime, buyers had to pay only 1% as service tax and 1 % value-added tax (VAT). Therefore, an individual buying gold was entitled to pay 2% extra over its selling price.
GST on gold imports
Gold is primarily imported. However, international imports do not fall under this regime. A GST authorised individual/business importing gold from overseas has to pay 10% as customs duty on gold imports instead of paying GST on gold. The end-users bear this cost as GST applicable over and above the customs duty paid by gold importers.
Revised tax rates under GST on gold jewellery
GST impacts your business in many ways. Filing GST is an important criterion when availing funds for business expansion. Thus, gold business owners must know the various taxes/tariffs applicable to manufactured gold jewellery and imported gold items.
10% customs duty on gold imports from overseas.
3% GST on the price of gold jewellery
5% GST on making charges of gold jewellery.
Business owners can also calculate GST like a pro using online tools and by knowing a few basics.
Impact of GST on gold sector-wise
Organized sector – In India, only 30% of operations fall under the organized gold sector. It brings more transparency and accountability in buying and selling of gold jewellery. However, higher rates may lead to the smuggling of gold without authorized bills.
Unorganized sector- 30 out of 700-800 tonnes of gold are smuggled and imported via the Middle East and together constitute this unorganized sector. And the increase in gold import sales is further leading to increased smuggling of gold than before. Hence, many merchant associations are appealing to the government to reduce its import duty.
Key factors to keep in mind when buying gold jewellery
Check gold purity – When buying gold, individuals must check its purity. One must only buy hallmarked/BIS certified jewellery to that end. 24 Karat (24KT) signifies the highest quality of gold (pure gold or 100 per cent gold). However, they are not suitable to make jewellery. Jewellery is made using 22KT, 18KT or 14KT gold. Choosing jewellery with a higher quality of gold is always advisable.
Gold price – The weight and purity of gold determines its cost. Since the price of gold changes every day, individuals must cross-check its current price before purchasing.
Gold GST rate- Individuals must always demand a proper bill mentioning all details that add to the cost of the jewellery. Sellers include a 3% tax rate on gold value, 5% on making charges and labour charges under this GST bill.
In case you are a gold merchant, make sure to file GST returns so you can be –
Leverage it to obtain external financing
Several financial lenders across India offer small business loans to meet varied financial requirements if they present proper GST return statements. A majority of these loans provided by financial institutions are mainly business loan.
Several NBFCs like Bajaj Finserv also extend pre-approved offers on business loans to further streamline the application process. These offers are valid on various financial products, including a personal loan and a business loan. Individuals can check their pre-approved offers by providing their name and mobile number.
Despite the fact that introduction of GST on gold is increasing transparency, its advantages remain limited to organized sectors. And this is pushing several smaller jewellers and business owners to shift into unorganized sectors to avoid paying and charging GST while selling gold. Nonetheless, it’s imperative to understand the benefits of GST compliance so businesses can optimally benefit under the new regime.