The Goods and Services Tax (GST) revised the tax rate of all items, including gold. Currently, the GST on gold jewellery is 3%.
Gold attracted a service tax of 1% and a VAT of 1% before GST. Thus, consumers have to pay more on gold jewellery now with the introduction of GST.
The CGST (Central GST) is exempt whenever a nominated agency conducts an interstate movement of gold to a registered individual. However, this exemption affects only suppliers and not consumers.
GST on Making Charges
There is also a 5% GST on the making charge. This charge differs with jewellers and the type of the ornament.
Customs Duty on Gold
Gold also attracts a customs duty of 10%. This duty is applicable whenever gold is imported into this country.
Import duty and GST have various effects on gold. For example:
Increase in the Unorganised Sector
The GST gold rate has increased its price considerably. This may lead to an expansion of the unorganised sector as the customs duty is already high.
The unorganised sector is gold imported illegally into India, primarily through Dubai. According to research, around 100 to 150 tonnes of gold out of the around 800 tonnes bought in every year is unaccounted for.
Decrease in the organised sector
The organised sector of gold may see a decrease with an increase in the unorganised sector. Many businesses may opt for cheaper gold and sell them without an invoice to avoid the high GST on gold jewellery in India.
Some jewellers opt for external funding to ensure the continuation of imports and to avoid any illegal purchases. Various NBFCs provide business loans at competitive interest rates.
Imports might lower owing to an increase in the GST rate on gold. However, jewellers are merely taking advantage of the Free Trade Agreement with South Korea. Gold imported from South Korea does not attract customs duty. Only a handful of jewellers are using this FTA to bring gold into this country according to market research.
Things to keep in mind before you buy gold:
The price of gold increases or decreases depending on its supply, demand, and several other market-related factors. The current price reflecting on newspapers and the internet is on the basis of per 10 gm. of gold.
The making charge is usually a flat rate of a specific percentage applicable on the base price of an ornament.
It is beneficial to buy gold with a flat rate making charge when the prices are high. Similarly, purchase gold with a percentile making charge when the prices are low.
The purity of gold is usually denoted by karat. The majority of jewellery is 22 karat which includes 91.6% gold; the rest of the material is either silver, copper, cadmium, or zinc.
24 karat is the purest form of gold available. However, it is not used to manufacture jewellery owing to its softness.
The Bureau of Indian Standards (BIS) provides its logo on gold products that have undergone certification. BIS adds the refinement gradient alongside karat to certify the purity of gold.
Also, make sure the bill includes details of precious or semi-precious stone included in your product, if any. These items may attract a separate GST on gold jewellery.