Goods and service tax or GST is the new tax regime introduced by the Government of India. This tax regime came into effect in 2017, and since then, it has become a way to abolish multiple taxes levied on goods and services. With this GST, India has witnessed a new era of taxation. GST is mainly exercised on transferring and selling all the goods and services in India.
Gold is considered to have one of the most lucrative markets in India. People generally use it for personal purposes, but it also has other commercial purposes. Moreover, investment in gold is known as a good investment.
With the implementation of GST, there was a large-scale impact on the price of the commodities. Among them, gold is one such product whose price was also affected by this new regime. So, let’s find out the actual impact of GST on gold and the current taxation rate of GST on Gold. Shall we?
Let’s Have an Overview!
GST is primarily levied and paid by people when they opt to purchase or sale of gold in the form of jewellery. In the earlier period, paying taxes on the making charges of the jewellery was not included in the tax regime. But at present, as per the GST tax structure, one must pay the GST on making charges while purchasing the gold jewellery. One important note to remember, generally on import, purchase and to make charges on gold, GST provides different tax rates.
Furthermore, according to the GST rules, a person need not pay GST in case of using the proceeds of the old jewellery to buy a new one or even selling old jewellery. This is an excellent way to avoid paying GST while buying new Gold Jewellery from the proceeds of old ones, thereby saving a great deal of money.
GST Rate on Gold
As mentioned earlier, the current rate of GST charged on the sale and purchase of gold is entirely different from the previous tax structure. Here’s a brief discussion on this matter. Before the GST era, a person had to pay 1% as service tax with 1%VAT. So, he had to pay an extra 2% over and above the selling price of those purchased gold jewellery. But now, under the GST tax structure, gold rates in India today have changed drastically. Because now, anyone does not need to pay vat or sales tax under this current tax structure. But the gold-making charges and import duty have now increased by 5% and 10%, respectively. And the Gold GST rate on Gold value is now 3%, making gold more expensive.
Impact of GST on Gold Import
It is true that with the implementation of the GST in our country, imported gold has increased. And importers are taking advantage of this situation because of the current tax revision and because they are aiming for a free trade agreement with South Korea. And as a result of this agreement, the importers will get the permit to import gold without paying 10% of customs duty.
GST Impact on the Unorganized Gold Sector
At present, India is considered as the highest importer of gold around the world because of the extensive demand for this metal in the country. However, out of all the demand for this gold, a small portion of the demand is met through the illegal ways that are smuggled into the country through various ways. This is called the unorganised sector of gold. Because of GST, the prices of gold have increased; there is a chance it may increase the amount of smuggled gold in our country as compared to the previous ratio before the introduction of GST.
GST Effect on the Organised Gold Sector!
While the unorganised gold sector holds the smaller portion of the gold-import market, the organised gold sector swears by the major chunk of gold import. That is why the implementation of GST is recorded to have an immense effect on the gold trade in the organised sector.
But as every coin has a good or bad side, GST is no exception than that. Because of this GST, there will be more accountability and transparency in the gold market. On the other hand, it might force or attract the gold traders to incline towards the unorganised sector as well. As a result of this increase in taxes on gold, many merchant associations and traders have made formal requests to the government of India to reduce the import duty levied on the import of gold. Now the associations will be relieved by 4% in the import duty, a reduction from 10% to 6% of the import duty.
GST Impact on Making Charges!
After the implementation of GST, the gold market has seen many changes, and changes in Making charges of jewellery are another spectrum to consider thoroughly. GST levied on making charges is extended up to 5%. However, earlier, the proposed tax rate on making charges was 18%, but now after the implementation, the rate was kept at 5%.
On a final note, there are a few points that you must remember while buying the gold. Gold is used by people for personal purposes and also for future investment. So, while going to purchase, you must remember a few points concerning GST; this GST on gold is dependent on the fineness of the jewellery or metal. Gold of lower grade certainly has a lesser value, making the tax lower. On the other hand, remember that the rate of GST varies from precious stones to semi-precious stones, so the customer should ensure that both billings are different.
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