GST on Gold: Effect of GST On Gold Jewellery 2024

Find out how GST influences gold loans and the gold market in India. Learn about GST rates, exemptions, and how it has shaped gold prices and ornament taxation.

16 Nov,2023 09:14 IST 2752
Understanding The Impact Of GST On Gold

Gold is more than a cultural symbol in India; it is also a valuable asset that can be used as collateral. The Goods and Services Tax (GST) brought a major change in the taxation system for various sectors. In this article, we will explore how GST affects gold loans, and what it means for borrowers, lenders, and the gold market.

What Is GST On Gold?

GST is an indirect tax that replaced multiple taxes levied on different sectors. However, some financial services, such as loans, were excluded from GST. This applies to gold loans as well. The interest paid on gold loans is not subject to GST, as it is considered a compensation for the money lent and is therefore exempt.

However, there is a difference between the interest paid on gold loans and the processing fees charged by the lender. While interest is exempt from GST, processing fees are not. These fees are seen as a service provided by the lender and are therefore taxable under GST.

Table Of GST Rates On Gold

Item GST Rate
Gold Bars 3%
Gold Jewellery 3%
Gold Coins 3%
Making Charges 3%

Gold was subject to a fixed 3% GST, plus an additional 8% tax on charges. In response to objections voiced by various parties, the tax on the making charge was subsequently decreased to 5%.

How To Calculate GST On Gold Jewellery

To calculate GST on gold, you need to know the GST rates that apply to different aspects of gold. For example, if you buy gold jewellery worth Rs. 50,000, you have to pay 3% GST on the value of the jewellery, which is Rs. 1,500. This does not include the making charges, which are taxed separately.

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GST Rates For Gold Ornaments

Gold ornaments are a valuable asset for many people. The introduction of GST simplified the taxation of these ornaments. Before GST, there were various state-level taxes that caused price differences across regions. Now, there is a uniform GST rate of 3% on gold, which makes buying ornaments easier.

Gold Price After GST

GST also affected the gold price in the country. Before GST, the gold price was subject to different taxes, which caused price variations. With GST on gold, there is a single tax rate, which makes the gold price more consistent. However, the international gold price still affects the domestic gold price.

GST Exemptions For Gold

Not all gold transactions are subject to GST. Some transactions are exempt from GST. For example, gold imported by banks or supplied to them for export purposes is exempt from GST. Also, gold bars that are not tola bars are exempt from educational cess.

GST Impact On Gold

GST had both positive and negative effects on gold. On the positive side, it simplified the tax system and removed the complexities of the previous system. On the negative side, it raised concerns in the gold industry. Many jewellers and industry players worried that the 3% GST rate would reduce consumer demand. It is important to note that only 30% of this industry is organized.

E-Way Bill Rules For Gold and Its Form

The e-way bill system under GST also affected the transport of gold and other precious metals. An e-way bill is a document that the person in charge of the conveyance carrying any consignment of goods must have. There are specific rules for the movement of gold and other precious metals. The e-way bill has to be generated when the value of the goods transported is more than Rs. 50,000. It's a digital waybill that allows the smooth movement of goods across state borders.

In conclusion, GST's effect on gold loans and the gold market reflects the wider changes that GST brought to the Indian economy. The interest exemption from GST gives relief to borrowers who need financial help against their gold assets. However, the GST on processing fees highlights the importance of knowing the complete cost structure of a gold loan. The uniform GST rate on gold purchases has simplified pricing and removed regional differences. As the financial landscape keeps changing, being aware of GST rules helps borrowers, lenders, and industry players make informed decisions in the world of gold loans.

FAQs

1- How much is the GST charged on gold in India?

Ans- In India, there is a 3% GST on gold. Additionally, jewellers add a GST making charge of 5% to the price.

2- Can we claim GST on jewellery?

Ans- A person who imports gold for the purpose of selling gold jewellery may be required to pay 3% IGST. He may claim the GST on the imported gold. However, those who do not work in the gold industry are not eligible for a tax credit.

3- What are the new rules for gold purchase?

Ans- As per the new rules on gold purchase with respect to GST, 3% GST will be charges and jewellers will add another 5%of the price as making charges. An e-way bill will also be created for transportation of the gold.

4- What is the GST on 24 carat and 22 carat gold?

Ans- Irrespective of the carat of gold, a 3% GST will be applicable on all gold.

5- Is there any way to save GST on gold? How much tax is charged on digital gold?

Ans- No, GST will be applied if you sell your old gold jewellery and buy new gold jewellery in a single transaction. This means that people can reduce their GST tax by simply swapping their old gold for new gold.

6- How much tax is charged on digital gold?

Ans- Similar to buying physical gold, there is a 3% GST on all insurance premiums, storage costs, and trustee fees for digital gold.

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Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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