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GST on Gold

Updated on :  

08 min read.

GST on gold in various forms is discussed at length in this article. GST subsumed VAT, service tax, excise duty and several other indirect taxes charged on domestic transactions. 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.

Latest Update

12th September 2022
National Informatics Centre (NIC) released an update on the e-way bill portal for a separate window to generate e-way bills for the movement of gold, gold jewellery and precious stones. Part-B details cannot be updated by default for security reasons.

1st February 2021
Union Budget 2021
The basic customs duty on gold and silver is reduced from 12.5% to 7.5%. However, an additional cess called Agriculture Infrastructure And Development Cess (AIDC) will be levied at 2.5% above it.

What is GST on Gold?

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 for gold is as follows-

ParticularsHSN CodeGST 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 shaped7101, 7102, 7106, 7107, 7108, 7109, 7111, 7113, 7114, 7116, 71183%
Job work in relation to cut and polished diamonds, plain or studded jewellery of gold, silver and so on99881.5%

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:

ParticularsBefore GST
()
Under GST (Not as a composite supply)
()
Under GST (As a composite supply)
()
Base price of 10 gm gold (Assumed)1,00,0001,00,0001,00,000
Add: Basic customs duty (10%)10,00010,000*10,000*
Assessable value for service tax 1,10,0001,10,0001,10,000
Add: Service tax (1%)1,100NilNil
Assessable value for VAT1,11,0001,10,0001,10,000
Add: VAT ( 1%**)1,111NilNil
Assessable value for GST 1,12,1111,10,0001,10,000
Add: GST on gold at 3%Nil3,300
Total value of gold1,12,1111,13,3001,10,000
Add: Making charges at 10%^ (On base price+customs duty)5,5005,5005,500
Assessable value for GST 1,17,6111,18,8001,15,500
Add: GST on making charges at 5%Nil275
Add: GST on gold jewellery at 3%^^ (For composite supply)3,465
Total value of gold jewellery1,17,6111,19,0751,18,965
  1. *The customs duty rate was increased to 12.5% from the earlier 10% vide Finance Act 2019.
  2. **Assuming to be 1%, may vary with the state/UT
  3. ^Making charges vary with every jeweller. We are assuming it to be 10% in this case.
  4. ^^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.

Impact of GST on Gold

From the above comparison between ‘before GST’ and ‘under GST, as a composite supply, we can see a price rise of Rs 1,354 which is an approximate increase of 1.1% under GST. The price rise is on account of the increased tax rate from 2% to 3% under GST on pure gold or gold bars.

Further, GST is newly levied on the making charges, and it was earlier not present in the erstwhile indirect tax regime. These factors have contributed to the price rise.

Budget 2019 also increased the customs duty on gold bars imported from outside India. It is 12.5% against the earlier rate of 10%.

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 are 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, he 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.

FAQs on GST on gold

How much GST on gold?

The GST on gold is charged at a rate lower than most of the goods and services. The rate of GST for gold in India or GST for gold coin is 3%. This rate is charged as a total of CGST and SGST (which is 1.5% each) or just the IGST rate of 3% depending on whether the sale is intrastate or interstate respectively. Further, GST on gold making charges by jewellers is 5% as total rate and computed on the price.

How much GST on hallmark gold?

GST on hallmark gold is 3% whereas the making charges attract 5%.

How much GST on gold bar?

GST on gold bar attracts a rate of 3%.

How much GST on digital gold?

GST on digital gold is 3% on all expenses of insurance premium, cost of storage, and trustee fee, like the purchase of physical gold.

Can individual claim GST on gold?

An individual who is into the business of selling gold jewellery and imports gold may pay IGST on it at 3%. He can claim GST on gold imported. But individuals who are not in the business of gold cannot claim tax credit.

Do we need eway bill for gold transportation?

Until the CBIC notifies the removal of the exemption in chapter 71 on gold, e-way bill need not be generated. However, NIC has updated the system for a separate window to generate an e-way bill for gold movement.

What is GST rate on gold making charges?

GST on gold making charges by jewellers is charged at a total rate of 5% computed on the price.

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