GST on Gold: GST Rate on Gold Purchase, Jewellery, Coins, Biscuit & Bar

Gold navigates a complex tax landscape in India despite it holds significance not just around the time of Dhanteras. If you're in the business of selling gold ornaments or gold biscuits, you would understand that impact is not just pricing but also the way gold is crafted, sold, and imported. Moreover, you could be an individual looking to purchase gold, but lack clarity on the taxes charged. We have curated this article on taxation - GST on gold in various forms, for you'll. 

GST subsumed VAT, service tax, excise duty and several other indirect taxes charged on domestic transactions. Moreover, Tax on the making charges on gold jewellery was introduced under GST. On the other hand, basic customs duty continues to be collected on the import of gold from other countries and the levy of IGST. So, how GST on gold will be calculated is explained in detail in this article, along with-

• What is GST on Gold?
• GST Rates on Gold
• GST Rates on Gold Making and Gold Purchase
• GST Calculation on Gold with Example
• GST on Digital Gold Purchase
• GST on Gold Import
• Impact of GST on Gold
• FAQs around GST on Gold

Latest Updates

23rd July 2024
In the Union Budget 2024, the Finance Minister announced to reduce the custom duty on import of Gold by 9% and the new rates were subsequently notified by the CBIC.

Type of Custom Duty/ Rates	Gold Bar and Findings		Gold Dore
	Old	New	Old	New
Basic Custom Duty (BCD)	10%	5%	10%	5%
Agriculture Infrastructure and Development Cess (AIDC)	5%	1%	4.35%	0.35%
Total	15%	6%	14.35%	5.35%

What is GST on Gold?

GST is imposed on the sale of gold in various forms under the law. Gold bars or gold jewellery fall within the definition of ‘Goods’ as per the GST law. Under Section 7 of the CGST Act, the supply of gold (without any job work) is considered the supply of goods. 

GST Rates on Gold?

GST Rates on Gold in various forms with their respective HSN Codes are as follows-

GST rates on gold purchase and GST on gold making

As per Section 8 of the CGST Act, selling gold ornaments or jewellery to the common man is a composite supply of goods and services. The gold used is considered goods and making charges or value addition is towards job work. Since the principal supply is the sale of gold, the GST rate of 3% shall be levied instead of 5% on the total value of jewellery, whether or not making charges is shown separately. The CBIC has clarified this in its sectoral FAQs on what is the GST on gold, including GST on gold rate.

The GST registration threshold limits that commonly apply to normal taxpayers apply to businesses in gold mining and distribution as well. Further, the composition scheme under section 10 of the CGST Act is available to businesses selling gold.

Many gold merchants or sellers or jewellers take the services of goldsmiths and specialists who carry out job work on the gold bars or gold biscuits supplied by them to make jewellery. It is considered a supply of service. The goldsmiths will charge for their service known as making charges which will attract GST of 5%. If these goldsmiths or specialists are not registered under GST, the gold merchant or jeweller must pay GST at 5% on a reverse charge basis.

Consumers who approach the goldsmiths by themselves will also have to pay 5% GST if the goldsmith is registered under GST.

GST is not charged if unregistered individuals sell gold jewellery or exchange gold ornaments to buy new ones at jewellery shops. It is not considered furtherance of business and is out of the scope of supply under GST. However, if dealers or gold companies such as Attica Gold company, Aashraya Gold Company or Manappuram Gold Loan, etc. purchase and sell second-hand gold jewellery, GST applies on the value of such gold calculated as per the rule 32(5) of CGST Rules, after satisfying the conditions.

Repair works on jewellery will be considered the making charges for which GST is charged separately at 5%.

GST Calculation on Gold

To set the context, when calculating GST on gold jewellery, GST on gold ornaments, GST on gold coin, GST on gold biscuit, GST on gold bar or GST on gold purchase, price includes the cost of extracting and processing the gold, and the profit margin, but does not include making charges. However, the price of gold jewellery additionally involves making charges. Up to 30th June 2017, taxes such as VAT and service tax were levied on its price. Thereafter, it was replaced by GST.

Let us take an example of the import of gold jewellery and compare its prices under pre-GST and the GST regime, and know what is pre-GST and GST for gold as follows:

1. **Assuming to be 1%, may vary with the state/UT
2. ^Making charges vary with every jeweller. We are assuming it to be 5% in this case.
3. ^^If the supply of gold jewellery is considered a composite supply, then the GST rate chargeable on the gold jewellery, including making charges, is 3%. Supply of gold is considered as the principal supply.

GST on Digital Gold Purchase 

Same rate of GST of 3% is charged for digital gold purchase as well.

GST on Gold Import

Import of gold attracts a 6% customs duty, which is separate from the GST. Thereafter, IGST of 3% gets attracted.

Impact of GST on Gold

GST is levied on the making charges which was not present in the erstwhile indirect tax regime. When GST was introduced, the rates were high, rising the prices of gold purchase. Currently, with the customs duty reduced, we can expect the overall prices to settle at lower value. 

GST on Gold Exemptions

A GST exemption was announced at the 31st GST Council meeting on 22 December 2018. Accordingly, GST is not charged for the supply of gold made by the notified agency to GST-registered gold jewellery exporters.

The move has minimised the GST burden on Indian exporters of gold jewellery and probably made Indian gold exports more competitive on the world market. However, domestic buyers of gold jewellery were not impacted.

e-Way bill rules for gold and its forms

Prior to 13th September 2022, CGST Rule 138(14) states that transporting gold in any form including jewellery, goldsmith’s wares and articles (Chapter 71), did not require an e-way bill. Hence, whether or not the supplier or recipient of gold is registered under GST could transport gold without carrying an e-way bill.

From 13th September 2022, as per respective state notifications, the NIC has enabled a separate window for generating e-way bills for transporting gold, gold jewellery or precious stones.

Availability of input tax credits for GST on gold business

The jeweller or gold merchant can claim Input Tax Credit (ITC) paid on the raw materials used, i.e., gold and other job work charges incurred. Even when the gold merchant pays tax on a reverse charge basis for supply from an unregistered job worker, they can claim the ITC on such tax.

Popular Advance Rulings on GST on gold under GST

• Karnataka AAR in the case of M/s Attica Gold Pvt. Limited in order KAR/ADRG/15/2020 dated 23rd March 2020

Matter/Issue:

The applicant gold company offers spot cash for gold and releases the pledged gold at the current market price registered under GST. In the case of second-hand purchase of gold from unregistered individuals if there is no change in the type/quality of the goods, then:

• Valuation: Whether the GST is charged only on the difference between the selling price and the purchase price, as provided in Rule 32(5) of the CGST Rules?
• ITC Claim: Whether the company can claim ITC if purchases are made from the dealer from whom the marginal scheme is applicable?

Ruling:

• Valuation: Yes, if the company raises an invoice as second-hand goods or deals in it without any change in form/type of the jewellery purchased, the valuation of the gold jewellery purchased from unregistered individuals will be as per Rule 32(5) of the CGST Rules. The valuation for GST is the difference between the selling price and the purchase price if it is positive. However, if the purchase price is more than the selling price, then no GST is levied. Moreover, non-availment of the input tax credit will be an additional condition.
• ITC Claim: If the purchase of second-hand gold jewellery is from a registered person, ITC is available. In such a case, the margin scheme, as discussed above, will not be available for the gold company on its further sale.

• Maharashtra AAR in the case of M/s Biostadt India Limited in order GST-ARA- 72/2018-19/B- 165 Mumbai dated 20th December 2018

Matter/Issue:

The applicant company is in the business of crop protection chemicals and hybrid seeds. It launched a sales incentive campaign -Kharif Gold Scheme 2018. In simple words, the scheme offers 10 gm and 8 gm gold coins to its customers for purchases above a certain quantity and for making minimum payments, respectively. The issue was as follows:

• ITC Claim: Whether the input tax credit can be availed on the procurement of gold coins used for conducting sales promotion?
• ITC Claim for similar schemes: Whether ITC is available for any other similar schemes

Ruling:

• ITC Claim: No, ITC is not available for claims for purchased gold coins. The distribution of gold coins is not the principal business of the taxpayer company in compliance with Section 16 of the CGST Act. Further, Section 17(5) on blocked ITC that prevails over Section 16 disallows ITC claims for disposal of any purchased goods as a gift. The distribution of gold coins under the scheme is also considered a ‘gift’.
• ITC Claim for similar schemes: No, ITC is not available for claims for any other similar schemes.

Read more: GST on Diamond Jewellery: Applicability, GST Rate and HSN Code