GST ON JEWELLERY
GST ON JEWELLERY
Everyone is looking to find the impact of GST on their pocket. What will be the long as well as short-term effect of GST on their budget, has become a matter of discussion. One is trying to know the pros and cons of GST on different industries. In this article, we will try to throw light on the effect of GST on jewellery industry.
Homemakers are more interested to know how their budget will be affected by the new Tax system. Sessions have been organized by different organizations and communities so that people can be made aware regarding GST. Agencies are helping startups and businesses in getting through the registration process.
GST on gold
3% tax rate on GST has kept the jewellery industry shining. Small players, as well as large market share takers, are happy with this fixed tax rate. Currently, the tax rate on jewellery is divided as 1% tax rate on excise, 1.2% on VAT and 10% customer’s duty on bullion. This figures out to be 12.43%. With GST, there will be an increase in price rate as 3% for gold, 18% for making charges, and 10% of the customers, the net rates comes to be 15.67%, therefore, making a hike in 3.24% in price rate.
Some jewelers include making charges in the price while some charge making charges on the final price. This disparity in price has been removed by GST.
Decrease in making charges
GST Council has decreased the making charges on gold from 18% to 5%. Making charges is the cost involved in converting raw gold into beautiful jewellery. This charge can be divided into two parts. Raw gold is fragile. So, metal like bronze is added to make it hard. This is the first stage where cost is involved. At the second stage, the gold bricks are given a shape of beautiful jewellery.
The price of gold ornament can be calculated as:-
Price of gold (carat) x weight (in gm +wastage) + making charges + VAT
Impact on demand of gold by consumers/customers
Hike in taxes on gold due to GST is slightly going to affect the demand rate in the initial phase and there will be some decrease in the purchase of gold for few months. It is not going to affect in long run. Players of this industry were already aware of the hike in price, so, they had already kept gold in stock. Hence, the import will be low for some time.
Impact on players of this industry
GST is going to benefit the organized players in the following ways:-
- Easy to follow and implement new rules under GST.
- High growth and market capture.
GST on resale of old gold jewellery
It is good news for those who are looking to resale their old jewellery. The government has decided not to charge any tax rate on such. Now female can enjoy reselling old jewellery and can have a new one at its place.
Thus, overall GST on gold is not going to affect this industry much. There will a good response to such initiative of Government in coming future.