The Government of India introduced the Goods & Services Tax in July 2017. The introduction of GST is the beginning of a new tax regime in India. By shifting to a single taxation rule for all goods and services, the government aims to provide uniformity and solve multiple or compounded tax rate issues. In this article, we will discuss GST on Gold and the Impact of GST on the Gold Sector in detail.
Before discussing the significant factors related to GST on Gold, first, we discuss the concept of GST.
Comprehend about GST
GST is known to be as the Goods and Services Tax which is levied on the supply of goods and services. The principal object of this taxation system is to control the cascading effect of other indirect taxes. GST is required only on value addition at each stage. Although, GST Registration is essential for registering any businesses.
The Impact of GST on Gold
Gold is one of the few items that attract different GST rates at different levels, right from the supply of gold to its manufacturing.
Before the implementation of GST, the service tax imposed 1% along with a VAT of 1%. It meant that the individual had to spend an additional 2% over and above the selling price of gold.
However, with the implementation of the new GST structure, the tax on gold has been fixed at 3%, with a 10% import duty. Also, it has made the import of gold costlier and has led to a decrease in the demand and the liquidity of gold.
The Impact of GST on the Gold Sector
Impact on the Unorganised Sector
India imports roughly 700-800 tonnes of gold annually. Approximately 4-5% of this is imported illegally or smuggled through the Middle East by the unorganised sector. The hike in the import rates is likely to increase the smuggling of gold further.
It is precisely why several merchant associations have been appealing to the government to reduce the import duty on gold. However, the good news is, since the GST regime requires sellers to maintain a record of every transaction, we can expect an improvement in authenticity and accountability.
Impact on the Organised Sector
Currently, only 30% of the gold sector in India falls under the organised category. The GST regime aims to increase transparency and accountability in the gold industry; however, the high rates may also negatively impact and may lead to vendors smuggling gold or selling gold items without a bill.
Impact of GST on Gold Making Charges
Earlier, the making charges for gold attracted a fixed rate of 12%, with an additional 12% charged as customs duty. The gold making charges were set at 18% when the Government of India introduced the GST regime; however, it was later reduced to 5% after the decision received a lot of criticism.
Download E-Startup Mobile App and Never miss the freshest updates narrating to your business.