Gold is a valuable and highly desired metal. In India, it is subject to Goods and Services Tax (GST). This tax has become an important factor for buyers and investors to consider when purchasing gold. The GST on gold is set at 3%. This rate applies to the value of the gold itself.
And there is also a 5% GST on making charges for gold jewelry. This applies whether the jewelry is plain or studded with precious stones.
In this article, we will cover GST on all types of gold, including physical gold, bars, coins, and digital gold. We will explain how GST is calculated and the effects of GST on the gold market.
What is GST on Gold?
The GST rate for gold is 3%. This applies to all forms of gold, including:
- Gold bars
- Gold coins
- Gold jewelry (plain or studded with precious stones)
- 22-carat, 24-carat gold (or other purities)
On top of this, a 5% GST is applied to the making charges for gold jewelry. This covers the cost of turning raw gold into finished jewelry.
Latest Update
The Union Budget for 2024-2025 brought important GST rules changes for gold and silver. The Government of India has reduced customs duties on both metals.
Customs duties have dropped from 15% to 6%. This includes a cut in the basic customs duty on gold. The rate has been lowered from 10% to 5%. Additionally, the Agriculture Infrastructure and Development Cess has decreased.
It has been reduced from 5% to 1%. As a result, the total tax on gold and silver is now 6%. This is a decrease from the previous 15%. Due to these changes, domestic gold prices have fallen. Prices have dropped significantly over the past week. This policy change has had a direct impact on the gold market.
GST Rate on Gold
| Particulars | HSN Code | GST Rate |
| Precious stones (excluding diamonds) and semi-precious stones that are either unworked or graded but not yet strung, mounted, or set. Ungraded precious stones (other than diamonds) and semi-precious stones are temporarily strung for easier transport. This also includes synthetic or reconstructed stones, which may be unworked, simply sawn, or roughly shaped. | 7103, 7104 | 0.25% |
| Diamonds, gold, pearls, silver, and jewelry made from gold or silver, including synthetic or reconstructed stones, and stones that are unworked, simply sawn, or roughly shaped. | 7101, 7102, 7106, 7107, 7108, 7109, 7111, 7113, 7114, 7116, 7118 | 3% |
| Job work related to cutting and polishing diamonds, as well as the creation of plain or studded jewelry made from gold, silver, etc. | 9988 | 1.5% |
Here’s the Table of GST Rates on Gold in India:
| Type of Gold | GST Rate |
| Gold Bars, Coins, and Jewelry | A GST rate of 3% applies to gold bars, coins, and jewelry. |
| GST on Gold Making Charges for Jewelry | Gold Jewelry-making charges are taxed at 5%. |
| Gold Import | Gold imports are taxed at 10.75%, which includes a 7.5% customs duty and 3% GST. |
GST Rate on Purchases in India
Gold purchases in India are subject to a 3% GST. This is divided between CGST (1.5%) and SGST (1.5%). Here’s a breakdown of how GST applies:
- GST Rate: 3% of the taxable value, as mentioned on the invoice.
- Offline Purchases: When buying gold offline, both CGST and SGST apply if the purchase is within the same state.
- Online Purchases: If the purchase is online and the seller is from a different state, IGST (Integrated GST) applies.
- Additional Charges:
- Customs Duty: Gold imports have a 10% customs duty, which was in place before GST.
- Gold Making Charges: A 5% GST is added to the making charges for jewelry. This is a recent update; before GST, only VAT or service tax was applied.
GST Calculation on Gold Purchases
Here’s how GST is calculated for different types of gold transactions:
- Type of Transaction Tax Rate
- Import of Gold 12.5% customs duty on imported gold value
- Gold Jewellery Making Charges 5% GST on making charges
- GST on Gold Purchase : 3% GST on the value of gold
These taxes are based on the type of transaction. The appropriate GST rates are applied to each part of the purchase.
Example Calculation of GST on Gold
Let’s look at an example to make this easier to understand:
Suppose you buy 1 kilogram of 24-carat gold worth ₹50,000. The GST on this purchase would be:
- GST = 3% of ₹50,000 = ₹1,500
In addition, if you get jewelry made, the making charges may apply. For example, if the making charge is ₹5,000, the GST on making charges would be:
- GST on Making Charges = 5% of ₹5,000 = ₹250
So, the total GST you pay will be ₹1,500 for the gold and ₹250 for the making charges. In total, ₹1,750 will be the GST on your gold purchase.
GST Rate on 24-Carat Gold in India
The GST on 24-carat gold in India is 3% of the value. For every ₹100 worth of 24-carat gold, ₹3 is charged as GST. This 3% only applies to the gold’s value. If you add making charges, these are subject to an additional 5% GST. So, the total GST will depend on both the gold’s value and the making charges.
GST Rate on 22-Carat Gold in India
For 22-carat gold, the GST rate is also 3% of the gold’s value. For example, if you purchase ₹1,000 worth of 22-carat gold, you will pay ₹30 as GST. Just like 24-carat gold, making charges attract a 5% GST. So, the GST rate is the same for both 22-carat and 24-carat gold, and it depends on the value of the gold.
GST on Ready-Made Jewellery (Ornaments)
For ready-made jewelry, a 3% GST is charged on the total value. This includes both:
- The price of the gold
- The making charges
The GST applies to both the gold and the craftsmanship together, meaning they are treated as a single taxable item.
GST on Gold Bars and Coins
Gold bars and coins are taxed at a 3% GST rate. This tax is applied only to the value of the gold. Since no making charges are involved, the tax calculation is straightforward and based only on the gold’s intrinsic value.
GST on Second-Hand Gold
The GST treatment for second-hand gold depends on whether the seller is a registered dealer:
- Registered Dealers: A 3% GST is charged on the sale price.
- Individuals: Individuals selling second-hand gold typically do not pay GST. However, the buyer, usually a registered jeweler, will need to pay GST when buying second-hand gold.
GST on Digital Gold Purchase
When purchasing digital gold, a 3% GST is charged on the value of the gold. This is collected by the seller and paid to the government. There is no additional GST when you sell or redeem your digital gold. This makes digital gold an easy and cost-effective investment option.
e-Way Bill Rules for Gold and Its Forms
Before 13th September 2022, there was no need for an e-way bill when transporting gold in any form, including jewelry. However, after this date, a new rule requires e-way bills for transporting gold, jewelry, and precious stones. This rule helps improve tracking and regulation of gold transportation under GST.
Availability of Input Tax Credit (ITC)
Gold merchants and jewelers can claim Input Tax Credit (ITC) on GST paid for raw materials like gold and job work charges. If a gold merchant pays tax on a reverse charge basis for supplies from an unregistered job worker, they can still claim ITC.
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The GST Effects on Gold Market in India: Challenges, Opportunities, and Solutions
The introduction of GST on gold in India has greatly affected the gold market, creating both challenges and opportunities.
- Higher Prices and Lower Demand: One noticeable effect is the increase in gold prices. The 3% GST replaced earlier taxes, making gold costlier. On top of that, a 5% GST on jewelry-making charges has reduced consumer demand. This has also affected gold’s appeal as an investment.
- Increased Transparency: On the positive side, GST has improved transparency. It now requires all gold transactions to be documented. This has helped make the sector more accountable, as only 30% of gold transactions were previously organized.
- Other Influences: It’s important to note that factors beyond GST have also contributed to the price increase. Changes in exchange rates, a drop in local gold mining, and rising international gold prices are all factors at play.
- Opportunities for Exporters: There’s a silver lining for exporters. With Free Trade Agreements like the one with South Korea, GST-registered importers can bring in gold without paying the additional 10% customs duty. This makes Indian gold exports more competitive internationally.
Conclusion
Understanding GST on gold and jewelry is important for both buyers and investors. The 3% GST on gold and an additional 5% on making charges can add to the final cost.
It’s also essential to be aware of the HSN codes for proper classification and taxation.
GST has made the tax process simpler, but knowing how it works will help you make informed decisions when investing or buying gold.
If this information has helped you better understand GST on gold, and you’re now ready to make your gold purchase, we’d love to recommend GGC – Gujarat Gold Centre (GGC).
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You can easily explore their appealing collection of 24k pure gold bars and coins and buy gold online directly from the GGC website. Start your investment journey with confidence at GGC!
