The GST or Goods and Services Tax, which took effect on 1st July 2017 was a revolutionary step in the Indian taxation system. It encompassed all manufacturers, investors, and consumers since it replaced all taxes like the Value Added Tax (VAT), Customs and Central Excise Duties.
The Union Ministry of Finance proposed three tax slabs in this new regime for tax. Initially, the GST rate for gold was 3%, and an 8% additional tax was levied on jewellery-making charges. Subsequently, this tax on making charges was lowered to 5% as various groups raised concerns.
Gold prices in the post-GST era experienced several fluctuations, and analysts opined that this tax would reduce gold demand due to higher taxation. Despite this additional tax burden, gold prices have been rising due to unstable market conditions.
The gold prices have risen owing to retained import duties of 10% besides the 3% GST on gold rates and the 5% GST payable on making charges. However, gold prices post-GST have steadily risen because of higher demands in foreign markets. Moreover, the plunging value of the US dollar resulted in higher trading of the metal and increased its value.
Long-term outlooks on the Indian gold rate post-GST, however, are positive even though there are fears of spiralling gold smuggling owing to the high costs of buying this noble metal. The Indian jewellery sector is somewhat content with the prevailing gold prices post-GST, even though average consumers complain about spiralling costs.
The following GST is applicable on the purchase of gold:
The initial tax on jewellery making was 18%, reduced to 5% now. The high tax would have fueled the consumer’s burden as the latter would have had to bear it. The initial 18% rate also led to the consumer paying nearly 4% tax. The reduction has been welcomed wholeheartedly by all Indian jewellery bodies, which feel that this rate reduction will lead to higher turnovers in the market for gold manufacturing.
This is possible by reselling old gold. The amount does not attract tax, provided it is used to purchase new jewellery. Before GST, a 3% charge was made on selling old gold even though new gold was bought.
As things stand, it may thus be seen that before the implementation of GST, there was a 1% VAT and Sales Tax, which have been abolished. However, taxes on making charges that were non-existent in the pre-GST era have gone up to 5%. The import duty of 10%, which existed in the pre-GST era, continues to exist. Finally, the GST rate on gold value, which was nil earlier, is now 3%.
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The GST levied on any gold jewellery is on its making charges or as a pre-determined percentage of gold's overall value. Usually, 3% GST is imposed on gold-based jewellery while 5% GST is levied on its making charges.
No, gold does not fall in the category of items attracting 12% GST.
