18 Jan 2019Posted By: Mudit Handa


How does GST impact the Gold Jewellery?

We all know that in India, Gold is not just a tradable commodity, it is very much a part of our culture, heritage and a symbolic of opulence. Due to its fabulous riches, India was once known as the golden bird, and even now gold continues to be the weakness for many traditional Indian women. Indians do have a custom of buying gold jewellery especially on festive occasions such as Dhanteras, Akshaya Tritiya or Deepawali. They also prefer to gift gold jewellery to their relatives on an auspicious event such as birthday, wedding, baby shower, housewarming and so on.

People usually spend hours at the jewellery shops but are unable to wisely bargain the price quoted. Usually, the popular jewellers who possess the GST registration do follow fair trade policy and proper GST invoicing procedure, but need not always follow fair pricing. However, after the introduction of the GST regime, gold prices have become much simpler than before.

Hence, everyone needs to know in detail how Goods and Services Tax affects the prices of gold jewellery.

 

#1. How was gold pricing done before GST in India?

Prior to the beginning of the Goods and Services Tax regime in India, the pricing on gold was somewhat complicated.

  • Earlier, a potential customer of solid gold or gold jewellery was supposed to pay VAT@1.2%.
  • Above that, he also had to incur excise duty @1% and basic customs duty @10%, which was added in the final price of gold or gold jewellery.
  • Besides, many gold jewellers before GST registration had probably indulged in black marketing of gold, as to earn more profit, in absence of fair tax policy,

 

#2. What is the rate of GST on gold?

  • The rate of GST on gold, as decided by the GST council is 3%.
  • Now, we see that the Value Added Tax (VAT), as well as Excise Duty, have now been replaced by just 3% of GST. Above that, 10% of basic customs duty is also levied.
  • After the inception of the GST regime, gold has become costlier by about 0.75%. Thus, the physical demand for gold jewellery has significantly reduced due to the charge of 3% GST along with 10% of customs duty respectively.

 

#3. How has GST affected the Gold Jewellery?

The overall impact of GST on gold jewellery can be elucidated through a tabular representation:

S.no.

Particulars

Before GST

After GST

a

Gold Price (100 gm 995)

2,65,500

2,65,500

b

10% Basic Customs duty

26,550

26,550

c

a+b

2,92,050

2,92,050

d

Excise Duty @ 1%

2,921

0

e

c+d

2,94,971

2,92,050

f

VAT @ 1.2%

3,540

0

g

e+f

2,98,502

2,92,050

h

GST @ 3%

0

8,762

i

g+h

2,98,502

3,00,812

j

Making charges at 12% of 2,92,050

35,046

35,046

k

i+j

3,33,548

3,35,858

l

GST on finished jewellery at 5%

0

1,752

  1. Net Price of Jewellery (k+l)

3,33,548

3,37,610

  • Total taxes and duties (B+D+F+H+L)

33,011

37,064

Consider this case study:

  • You want to buy 100gm gold @ 26,550/10g, the total price would be 2,65,500 + 26,550(10% customs duty), 2,921(excise duty@1%) and 3,540(1.2% of VAT). Final price is 3,33,548.
  • On the contrary, the value of 100 gm gold under GST is 2,65,500 + 26,550(10% customs duty) + 8,762(3% of GST). Now, the net value of gold is 3,37,610.

Also, read the  to know more.

 

#4. What is the benefit of GST for gold jewellers?

There is ample benefit of GST for gold jewellers.

  • The gold jewellers can avail the input tax credit on the gold jewellery.
  • GST is beneficial for the gold industry, as this will cause a shift from unorganised to the organised sector. 
  • Apart from that, the independent and small traders shall try to maximise their profit under the GST regime. Many jewellers get their jewellery made from other goldsmiths. This attracts 5% of GST.
  • This can help them start an in-house production.
  • Furthermore, GST reduces the cost of manufacturing and increasing earnings.

If you need any sort of help on GST registration, feel free to contact our business advisor at 8881-069-069.

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