If you’ve ever thought about buying or investing in gold, you’ve probably heard about GST on gold and wondered what it means for you and how to calculate so that a jeweler should cheat you. If you are engaged in the Gold Jewelry business, this article is going to benefit you too.
Let’s break it down together in simple terms, so you can make informed decisions with detailed discussion on HSN, GST Rates, calculation and Input tax credit availability.
What is GST on Precious Metal or Stones?
When it comes to gold or other precious metals, GST is applied at various stages of its sale, from the raw gold to the beautiful jewelry you wear. There are also classified GST rates on jewelry made with precious stones like diamonds.
First we will discuss the HSN specified for different types of precious jewelry as it is mandatory for registered taxpayers to mention HSN on the invoices else you can be penalized.
HSN of Precious Metals or Stones in GST
In GST, the previous metals or stones have been divided into two categories and GST rates are also different. This includes GST on gold and silver too.
| HSN – 7102, 7103, & 7104 | for those stones which may be processed or classified based on quality but are not assembled into jewelry, These stones are not part of any jewelry piece or set in metal Sometimes, these stones are temporarily threaded for ease of transport, but this does not count as being strung for final use | IGST is 0.25% Or CGST – 0.125% & SGST – 0.125% It has been defined in Schedule VI |
| HSN – 7101, 7105, 7106, 7107, 7108, 7108, 7109, 7110, 7111, 7112, 7113, 7114, 7115, 7116, 7117, 7118 | Pearls, natural or cultured, whether or not worked or graded means for final use.It covers Silver (including silver plated with gold or platinum), dust, powder, gold coin, Gold or gold Jewelry, andWaste and scrap of precious metal or of metal clad with precious metal, Imitation jewelry [other than bangles of lac/shellac | IGST is 3% Or CGST – 1.5% & SGST – 1.5% It has been defined in Schedule V |
HSN Codes for Different Types of Jewelry
- Gold (including gold plated with platinum): HSN 7108
- Silver (including silver plated with gold): HSN 7107
- Base metals clad with precious metals: HSN 7109
- Imitation jewelry: HSN 7117
You can read full detailed list of HSN and GST rates on Gold and other precious metals for jewelry purpose – Click here for Schedule V and Click here for Schedule VI
GST on Making Charges on Jewelry
It is very important to note that making of any jewelry falls under services and hence, defined under chapter 99 (related services only)
| HSN – 9988 for making services by way of job work in relation to jewelry (other than diamond) such as gold or silver or other precious stones | IGST is 5% Or CGST – 2.5% & SGST – 2.5% |
| HSN – 9988 for making services by way of job work in relation to diamonds jewelry | IGST is 1.5% Or CGST – 0.75% & SGST – 0.75% |
GST on Digital Gold or SGB
You will have to pay a GST of 3% only (as mentioned above) on buying digital gold and its related services like insurance, storage or conversion to physical gold. The same HSN under Chapter 71 will be applied. So there is no difference in GST on physical gold or digital gold.
GST is exempted on Sovereign Gold Bond as it is issued by the RBI. So you can invest in and earn interest too and can sell it at market value of Gold.
GST on Imported Gold
It is also 3% GST but customs duty is 12.5% as on date – May 2024, on the import of gold in India.
How GST is Calculated on Gold Jewelry?
Let’s go through a simple example:
- Suppose you buy 10 grams of gold at ₹50,000 per 10 grams.
- Making charges are ₹500 per gram.
- But, remember, it is a composite supply under GST. The main supply is selling of jewelry so it covers the making charges also.
Step-by-step calculation:
- Gold Value: ₹50,000 x 10 grams = ₹5,00,000
- Making Charges: ₹500 x 10 grams = ₹5,000
GST on Gold Value:
- 3% of ₹5,05,000 = ₹15,150
GST on Making Charges:
- Jeweler cannot charge separately 5% on selling of jewelry to their customers, as it is treated as composite supply.
Total Cost:
- ₹5,00,000 (Gold Value) + ₹5,000 (Making Charges) + ₹15,150 (GST of 3%) = ₹5,20,150
- Note: this is just illustration, Making charges can vary jeweler to jeweler.
Input Tax Credit (ITC) on Gold
The ITC mechanism allows businesses to claim credit for the tax paid on inputs. However, for gold:
- ITC on Gold: Not available for consumers but available for registered businesses.
- A registered businesses can claim ITC on GST paid for making charges and on gold purchased (whether it is intended to be sold – as-is or after making jewellery)
- The same case is applied on purchase of other precious metals like silver, platinum, etc.
FAQs About GST on Gold
Q1: Do I need to pay GST on second-hand gold jewelry?
- A: Yes, GST is applicable on the resale of gold jewelry. The GST rate is 3% on the transaction value.
Q2: Can I claim ITC if I am a goldsmith?
- A: Yes, if you are a registered goldsmith, you can claim ITC on GST paid for gold purchased and making charges.
Q3: Are there any exemptions on GST for gold?
- A: No, there are no exemptions for GST on gold, whether it’s in the form of bullion or jewelry.
Q4: How does GST affect the final price of gold jewelry?
- A: GST increases the final cost of gold jewelry as it includes 3% on the gold value on total sale value of jewelry inclusive of making charges. However, it also ensures transparency in pricing.
Q5: How does GST affect when an individual sells its jewelry?
- A: GST is not applicable on sale of individual jewelry for money
Q6: How does GST affect when an individual mortgages its Gold jewelry?
- A: Since this is a loan transaction, no GST is involved in mortgaging the jewelry or owned gold.
Conclusion
Understanding GST on gold helps you make better purchasing and investment decisions. Whether you’re buying gold coins, bullion, or exquisite jewelry, knowing how GST impacts the cost and the process can save you from unexpected expenses.
Remember, buying gold is not just about the beauty and value; it’s also about making a wise financial decision. Always check for the latest rules to stay informed. That’s what we do, we make our readers more informative about taxes so that they can make financially better decisions.
Read More: GST on Homebuyers and Land buyers: Detailed Guide (2024)
