GST on Gold in India

Gold Rate After GST

The price of gold following the adoption of the Goods and Services Tax (GST) regime has seen some fluctuations. Analysts were apprehensive that the tax would lead to a decline in demand for gold due to the high incidence of taxation.

At present, gold prices are seeing a rise due to unstable markets in spite of the additional tax burden. While the overall price of gold has risen, this has been due to the import duty associated with the metal, which has been retained. As a result, gold continues to attract an import duty of 10%, in addition to the 3% GST and 5% making charges GST.

The price of gold after GST has been steadily increasing due to higher demand for the yellow metal in overseas markets. The plunging U.S. dollar has led to higher volumes of trade in the metal, thereby increasing its value.

Long-term outlooks regarding the gold rate in India after GST appear to be mostly positive. Fears of increased smuggling due to the high costs associated with buying the metal abound, but it remains to be seen if these will come to pass. For the moment, the jewellery sector appears to be content with the price of gold after GST, though consumers have a few complaints over the rising cost.

GST on Gold Purchase

The tax slabs were announced on 3 June 2017 and gold will be taxed at a rate of 3%. In other words, all gold and gold-related jewellery would be taxed at a flat rate of 3%, which would be borne by the end consumer.

GST on Gold Making Charges

In addition to this, the government has also levied a 5% tax on making charges. At present, there is no tax on making charges, which account for close to 12% of the actual cost of the gold.

The tax on making charges was initially fixed at 18%, but appeals from Indian jewellery councils and bodies to reduce the rate resulted in the government fixing it at the present 5%.

A higher tax on making charges would have increased the burden on consumers, since the added cost would have been passed on to them. The initial rate of 18% would have also resulted in consumers having to pay close to 4% as tax.

Jewellery bodies and councils have lauded the change in rate and are confident that it will result in greater transparency in the gold manufacturing market.

GST Exemptions on Gold

On 22 December 2018, at the 31st GST Council meeting, a GST exemption was announced. As a result, the authorised agency does not charge GST on the supply of gold to registered GST exporters of gold jewellery. Due to this judgement, Indian exporters of gold jewellery no longer have to pay GST, which would likely increase their ability to compete on the international gold export market. Domestic gold jewellery buyers are not affected by this exception, though. 

Impact of GST on Gold

Below mentioned are a few ways how GST has impacted gold - 

1. Gold jewellery - GST is typically applied to gold jewellery either as a flat tax or as a defined percentage of the gold value. Because of this, the making fees charged by jewellers frequently differ from one another and affect the GST on gold coins and jewellery. 
2. Price increase - Gold became more expensive when the GST rate was implemented. The general demand for gold has decreased as a result of the increase in tax rates from 1.2% to 3%. The demand for gold has decreased as a result of its rising price, which has also affected the liquidity of gold investments. 
3. Improvement in transparency - Gold dealers are required by the Goods and Service Tax system to document each transaction. It is anticipated that this will increase openness and accountability across both sector groups. Notably, only 30% of this industry falls into the organised category. It is also expected that a high charge would induce sellers to smuggle gold or sell the precious metal without a valid bill. 

1. Free trade agreement – GST-registered importers can now ship gold without having to pay an additional 10% customs charge thanks to benefits like the Free Trade Agreement with nations like South Korea. 

GST on Gold Import and Export

Gold import and export are regulated under GST with specific guidelines:

1. Import of Gold: Attracts Basic Customs Duty (BCD) of 12.5% and Agriculture Infrastructure Development Cess (AIDC) of 2.5%. After import, 3% GST is levied on the assessable value including the customs duty.
2. Export of Gold: Exporting gold is considered a zero-rated supply under GST, meaning exporters can claim refunds on input taxes paid during manufacturing. However, proper documentation and compliance are required.

Gold Investment Options & GST Impact

There are multiple ways to invest in gold in India, and GST impact varies across them:

1. Physical Gold (Jewellery/Bars/Coins): 3% GST on gold value + 5% on making charges (if applicable).
2. Digital Gold: Treated like goods, and attracts 3% GST on the purchase amount.
3. Sovereign Gold Bonds (SGBs): No GST applicable; considered a financial product issued by RBI.
4. Gold ETFs and Mutual Funds: No GST at the time of investment, but may involve other charges like STT and capital gains tax. Understanding GST impact helps investors choose cost-effective gold investment options.

GST Compliance Tips for Jewellers

Jewellers must follow proper GST compliance to avoid penalties and ensure smooth business operations:

1. Register under GST if turnover exceeds the threshold limit (₹40 lakhs in most states).
2. Issue GST-compliant invoices with clear breakup of gold value and making charges.
3. File monthly or quarterly GST returns on time.
4. Maintain records of stock, purchases, and sales.
5. Claim Input Tax Credit (ITC) only on eligible purchases used for business purposes.
6. Keep all documentation ready for audit or assessment.

Penalties for GST Non-Compliance in Gold Trade

Failure to comply with GST regulations can attract heavy penalties for jewellers and traders:

1. Late Filing: ₹50 per day (₹20 for nil returns) for delay in return filing.
2. Wrong ITC Claim: 100% of the wrongly claimed credit or ₹10,000, whichever is higher.
3. Not Registering under GST: Penalty of ₹10,000 or 100% of tax due.
4. Supplying without Invoice: Penalty equal to tax evaded or ₹10,000, whichever is higher. Maintaining full compliance helps avoid these penalties and builds credibility with customers and tax authorities.