GST applicability on Gold

[Lokesh Aggarwal]

1. Introduction :-

Pre-GST excise duty and vat  levied on silver and taxed by 1% excise duty and 1% VAT and this tax structure varied based on state regulations. The tax structure for buying and selling silver was complicated! However, when GST was introduced, it reduced these multiple taxes and introduced a flat 3% GST rate under the current tax system.

On 23^rd 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%

2. GST rates on gold and respective HSN :-

With the implementation of Goods and Services Tax (GST), the taxation on gold in India has changed significantly. 3% GST applies to both 24 carat and 22 carat gold, affecting physical gold purchases. The taxation of gold in India has been significantly impacted by implementing the Goods and Services Tax (GST). 

HSN code	Product description	GST Rate
7102, 7103, 7104	Diamonds (rough and polished); other precious and semi-precious stones like ruby, opals, etc.; synthetic and reconstructed diamonds and other precious stones [Excluding such stones if set in or mounted in jewelry]	0.25%
7106, 7108	Silver (including gold or platinum-plated silver) unwrought or in semi-manufactured forms or powder form Gold (including gold bars and ingots)	3%
7113	Articles of jewelry and parts thereof (including gold jewelry)	3%
7114	Other articles of gold (excluding jewelry and parts)	3%

3. GST Calculation on Gold :-

It must be noted that a standard invoicing pattern is not followed in this sector leading to varying billing systems among jewellers. However, each city has a jewellery association that declares the gold rate every morning. 

Typically, the final price of jewellery is computed with this basic formula –

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

For example, a ₹1,00,000 gold purchase attracts ₹3,000 GST. This rate applies to all gold forms, including jewellery, coins, and bars.

4. 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.

5. Applicability of EWB :-

As per 50th GST council meeting on 11.07.2023, made it mandatory, vide the CGST Notification No.38/2023.

According to the notification, Anyone transporting gold and precious metals valued at Rs. 2 lakhs or more within a state will be required to generate e-way bills, if the state/UT GST laws notifies so. Such movement could be either due to a supply or sale or other than sale/supply. Further, if a GST-registered person receives gold or precious stones above the consignment value limit given above from an unregistered person, then also part-A of e-way bill is needed to be furnished/generated.

A. notwithstanding anything contained in Rule 138, every registered person who causes intra-State movement of such goods, -

(i) in relation to a supply; or

(ii) for reasons other than supply; or

(iii) due to inward supply from an un-registered person,

shall, before the commencement of such movement within that State or Union territory, furnish information relating to such goods electronically, as specified in Part A of FORM GST EWB-01, against which a unique number shall be generated:

B. Exemption from e way bill generation :– where goods are being transported: –

a) from the customs port, airport, air cargo complex and land customs station to an inland container depot or a container freight station for clearance by Customs;

b) under customs bond from an inland container depot or a container freight station to a customs port, airport, air cargo complex and land customs station, or from one customs station or customs port to another customs station or customs port, or under customs supervision or under customs seal.

6. Concluding Remarks :-

In conclusion, understanding the Goods and Services Tax (GST) on gold and jewellery is essential for both buyers and investors in India. With a 3% GST on the value of gold and an additional 5% on making charges for jewellery, the overall tax burden on gold purchases can impact the final cost. It’s important to be aware of the applicable HSN codes for accurate classification and taxation. While GST has streamlined the taxation process, being informed helps in making well-calculated decisions when buying or investing in gold.