GST on Gold in 2022 [Tax Rates, HSN Codes]
Implementing the Goods and Service Tax (GST) in India has an immense effect on the goods and services under its purview. The unified indirect tax has primarily affected the price of these commodities. The cost of gold under the GST regimen since 2017 has risen.
Gold is still a highly prioritised investment option in India. Any change in tax on gold is bound to have far-reaching consequences in the economy, affecting a massive section of the population. The slab of GST applied varies according to the stage of gold in the industry—manufacture, supply, etc.
In light of the tremendous role gold plays in the country, it is necessary to discuss the GST on gold in 2022. Therefore, you will also find the various tax rates and new rules for gold here.
GST rates on Gold
Intake | Before GST | After GST |
Gold Value GST Rate | Nil | 3% |
Gold Value Sales Tax | 1% | Nil |
Gold Value Value Added Tax | 1% | Nil |
Gold Value Import Duty | 10% | 10% |
Gold Value Making Charges | Nil | 5% |
Gold Prices Comparison During GST and Before It
The price of gold bars, bullion, or pure gold includes various costs—prices of gold extraction, gold processing, and margin of profit. All of these are affected by GST. The demand for gold has not affected the import of gold. The import duty has remained the same at 10% before and after the GST regime. Smuggling has not increased due to GST, as some belief. The margin of profit is subjective and not included here. In the case of gold jewellery, making charges are additional.
At present, the end-user bears 3% GST on gold and gold-related jewellery, 5% GST on making charges of gold jewellery, and 7.5% import duty. Thus, the customer’s total GST and duty implication work out 10.5% on pure gold.
Service tax and Value Added Tax were applicable on this price before the GST regime. To better understand the GST on gold, let us compare its prices under pre-GST and the GST regime as follows:
Intakes | Before Goods and Services Tax (₹) | During Goods and Services Tax (No Application of Composite Supply) (₹) | During Goods and Services Tax (Application of Composite Supply) (₹) |
10 gm of gold (Assumed Base Price) | 1 Lakh | 1 Lakh | 1 Lakh |
Plus: Customs Duty( 10 per cent Basic) | 10 Thousand | 10 Thousand | 10 Thousand |
Service Tax (Assessable Value) | 1 Lakh 10 Thousand | 1 Lakh 10 Thousand | 1 Lakh 10 Thousand |
Plus: 1 Percent of Service Tax | 1 Thousand 1 Hundred | Nil | Nil |
Value Added Tax (Assessable Value) | 1 Lakh 11 Thousand | 1 Lakh 10 Thousand | 1 Lakh 10 Thousand |
Plus: 1 per cent Value Added Tax | 1,111 | Nil | Nil |
Goods and Services Tax(Assessable Value) | 1 Lakh 12.111 Thousand | 1 Lakh 10 Thousand | 1 Lakh 10 Thousand |
Plus: Goods and Services Tax on gold at 3 per cent | Nil | 3,333 | Nil |
Gold (the total value) | 1 Lakh 12.111 Thousand | 1 Lakh 13.3 Thousand | 1 Lakh 10 Thousand |
Plus: Making charges at the rate of 10 per cent | 5,500 | 5,500 | 5,500 |
Goods and Services Tax (Assessable Value) | 1 Lakh 17.611 Thousand | 1 Lakh 18.800 Thousand | 1 Lakh 15.500 Thousand |
Plus: Goods and Services Tax on making charges at 5 per cent | Nil | 275 | Nil |
Plus: Goods and Services Tax on gold jewellery at the rate of 3 per cent (This is for composite supply) | Nil | Nil | 3,465 |
Gold Jewellery (The total value) | 1,17,611 | 1,19,075 | 1,18,965 |
Composite supply refers to the selling of two or more goods or services as a set and not in individuals’ fashion. A clear-cut rise in price can be witnessed of Rs 1,354. This figure, under the GST regime, is an approximate increase of 1.1%. This price rise is due to an increased tax rate, which went up to 3% from 2% on gold bars or pure gold.
GST rates on gold jewellery
The rate of GST on Gold or articles of jewellery of gold is 3%. In contrast, the rate of GST on precious stones (not including diamonds) and semi-precious stones is 0.25%.
Intakes | Rate of GST | HSN Codes |
Job work about diamonds was done through cutting and polishing jewellery of gold that has been studded or plained. | 1.5% | 9988 |
Gold or articles of jewellery of gold, and so on, inclusive of stones that are simply sawn or roughly shaped or unworked or reconstructed or synthetic | 3% | 7101, 7102, 7106, 7107, 7108, 7109, 7111, 7113, 7114, 7116, 7118 |
Precious stones (not including diamonds) and semi-precious stones, whether or not they have been graded or worked, but not set, mounted or strung
Ungraded precious stones (not including diamonds) and semi-precious stones, strung temporarily for convenience for transportation (including rocks that have been through reconstruction or are synthetic), apart from stones that are roughly shaped, simply sawn, or unworked | 0.25% | 7103, 7104 |
GST Exemptions
There was an announcement of the Goods and Services Tax exemption in 2019 at the GST Council meeting. As such, there shall be no charging of GST for the supply of gold to exporters for exports of Jewellery. However, the manufacturing of this gold should take place by a notified agency to a gold jewellery exporter that is GST-registered.
This move has significantly reduced the financial burden on exporters of gold in India. Moreover, this will likely make Indian gold exports more competitive in the international market. However, there shall be no GST on gold about exemptions on the domestic buyers of gold jewellery.
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FAQs
Q. What is a straightforward way of avoiding GST concerning gold?
Ans. A simple way of saving GST on gold is to exchange an old gold item for a new one. This should take place in a single transaction.
Q. Why does the GST amount on gold keep on fluctuating?
Ans. With the GST rate remaining consistent, the reason for the fluctuating GST amount is the price of gold. The price of gold depends on fluctuating factors such as currency value, the demand for gold in the market, and import duty.
Q. What is the significance of input tax credit (ITC) in the gold industry?
Ans. Input tax credit (ITC) is permitted by GST to assist the various gold market players. With ITC, these players can avail credit against the taxes payable on their outward supplies.