Gold Goods and Services Tax (GST): GST Rates for Purchasing Gold, Jewelry, Coins, Biscuits, and Bars

This article thoroughly explores how the Goods and Services Tax (GST) applies to various forms of gold. GST now covers what used to be separate taxes like VAT, service tax, and excise duty on domestic transactions. It also introduces a tax on the making charges of gold jewelry. However, when importing gold from other countries, basic customs duty still applies, along with IGST.

Newest Update:

September 12, 2022

The National Informatics Centre (NIC) has introduced a separate window on the e-way bill portal specifically for generating e-way bills for the transportation of gold, gold jewelry, and precious stones. Part-B details cannot be modified by default for security reasons.

February 1, 2021

Union Budget 2021

The basic customs duty on gold and silver has been reduced from 12.5% to 7.5%. However, an additional cess named Agriculture Infrastructure And Development Cess (AIDC) will be imposed at 2.5% on top of it.

What is the Goods and Services Tax (GST) rate on gold? 

Gold bars and gold jewelry are classified as “Goods” under the GST law. According to Section 7 of the Central Goods and Services Tax (CGST) Act, the sale of gold (excluding any job work) is regarded as the supply of goods. The GST rate applicable to gold is as follows:

 

Particulars	HSN Code	GST Rate
(1) Precious stones (other than diamonds) and semi-precious stones, whether or not worked or graded but not strung, mounted or set (2) Ungraded precious stones (other than diamonds) and semi-precious stones, temporarily strung for convenience of transport (includes synthetic or reconstructed stones, apart from unworked or simply sawn or roughly shaped)	7103, 7104	0.25%
Diamond, gold, pearls, silver, or articles of jewellery of silver or gold, and so on, including synthetic or reconstructed stones, unworked or simply sawn or roughly shaped	7101, 7102, 7106, 7107, 7108, 7109, 7111, 7113, 7114, 7116, 7118	3%
Job work in relation to cut and polished diamonds, plain or studded jewellery of gold, silver and so on	9988	1.5%

The GST rates for buying gold and the GST applied to gold crafting

Under Section 8 of the CGST Act, when gold ornaments or jewelry are sold to consumers, it constitutes a composite supply of both goods and services. The gold itself is classified as goods, while making charges or value addition are categorized as job work. Since the primary transaction is the sale of gold, a GST rate of 3% is applied instead of 5% on the total jewelry value, regardless of whether making charges are itemized separately. The Central Board of Indirect Taxes and Customs (CBIC) has provided clarification on this matter in its sector-specific FAQs regarding GST on gold, including details on the applicable GST rate.

Businesses involved in gold mining and distribution are subject to the same GST registration threshold limits as other taxpayers. Additionally, businesses selling gold are eligible for the composition scheme under Section 10 of the CGST Act.

Numerous gold merchants, sellers, or jewelers enlist the expertise of goldsmiths and specialists to perform job work on the gold bars or biscuits supplied to them, transforming them into jewelry. This service provision is recognized as a supply of service. The goldsmiths levy charges for their services, known as making charges, attracting a GST rate of 5%. In cases where these goldsmiths or specialists aren’t registered under GST, the gold merchant or jeweler is obligated to pay GST at 5% under reverse charge mechanism.

When consumers directly engage goldsmiths, they too are subject to a 5% GST rate if the goldsmith is registered under GST.

GST is not applicable when unregistered individuals sell gold jewelry or exchange gold ornaments for new ones at jewelry shops. Such transactions are not considered part of business operations and fall beyond the scope of supply under GST. However, if dealers or gold companies such as Attica Gold Company, Aashraya Gold Company, or Manappuram Gold Loan, etc., engage in the purchase and sale of second-hand gold jewelry, GST is levied on the value of such gold, calculated as per Rule 32(5) of the CGST Rules, upon fulfilling specific conditions.

Repairing jewelry will be regarded as making charges, attracting a separate GST charge of 5%.

Calculating GST on Gold

To provide context, when calculating GST on gold jewelry, gold ornaments, gold coins, gold biscuits, gold bars, or gold purchases, the price encompasses the cost of extracting and processing the gold, along with profit margins, excluding making charges. However, in the case of gold jewelry, making charges are additionally included in the price. Prior to June 30, 2017, taxes such as VAT and service tax were imposed on gold prices, which were subsequently replaced by GST.

Let’s consider an example of importing gold jewelry and compare its prices under the pre-GST and GST regimes, and understand the differences in pricing between pre-GST and GST for gold.

Particulars	Before GST  (₹)	Under GST (Not as a composite supply)  (₹)	Under GST (As a composite supply)  (₹)
Base price of 10 gm gold (Assumed)	1,00,000	1,00,000	1,00,000
Add: Basic customs duty (10%)	10,000	10,000*	10,000*
Assessable value for service tax	1,10,000	1,10,000	1,10,000
Add: Service tax (1%)	1,100	Nil	Nil
Assessable value for VAT	1,11,000	1,10,000	1,10,000
Add: VAT ( 1%**)	1,111	Nil	Nil
Assessable value for GST	1,12,111	1,10,000	1,10,000
Add: GST on gold at 3%	Nil	3,300	—
Total value of gold	1,12,111	1,13,300	1,10,000
Add: Making charges at 10%^ (On base price+customs duty)	5,500	5,500	5,500
Assessable value for GST	1,17,611	1,18,800	1,15,500
Add: GST on making charges at 5%	Nil	275	—
Add: GST on gold jewellery at 3%^^ (For composite supply)	—	—	3,465
Total value of gold jewellery	1,17,611	1,19,075	1,18,965

The customs duty rate was raised to 12.5% from the previous 10% according to the Finance Act of 2019.

**Assuming a rate of 1%, which may vary depending on the state/UT.

^Making charges differ among jewelers. For this case, we’re assuming them to be 10%.

^^If the supply of gold jewelry is deemed a composite supply, the applicable GST rate on the gold jewelry, inclusive of making charges, is 3%. The supply of gold is regarded as the primary supply.

The effect of GST on Gold

Upon comparing the prices “before GST” and “under GST” as a composite supply, we observe a price increase of approximately Rs 1,354, representing a rise of around 1.1% under GST. This increase is attributed to the higher tax rate, transitioning from 2% to 3% under GST for pure gold or gold bars.

Moreover, GST is now imposed on making charges, a facet absent in the previous indirect tax regime. These factors collectively contribute to the price escalation.

Additionally, in Budget 2019, the customs duty on imported gold bars was raised to 12.5%, up from the previous rate of 10%.

Exemptions from GST on Gold

At the 31st GST Council meeting on December 22, 2018, a GST exemption was introduced. As per this exemption, GST is not applicable on the supply of gold by the notified agency to GST-registered gold jewelry exporters.

This measure has reduced the GST burden on Indian exporters of gold jewelry and likely enhanced the competitiveness of Indian gold exports in the global market. However, this exemption does not affect domestic buyers of gold jewelry.

Electronic Waybill (e-Waybill) Regulations for Gold and its Variants

Before September 13, 2022, according to CGST Rule 138(14), transporting gold in any form, including jewelry, goldsmith’s wares, and articles (Chapter 71), did not necessitate an e-way bill. Consequently, both registered and unregistered suppliers or recipients of gold could transport gold without an e-way bill.

Starting from September 13, 2022, in accordance with state notifications, the NIC has facilitated a dedicated platform for generating e-way bills specifically for transporting gold, gold jewelry, or precious stones.

Availability of Input Tax Credits for GST in Gold Business

The jeweler or gold merchant is eligible to claim Input Tax Credit (ITC) on the GST paid for the raw materials utilized, such as gold, as well as other job work charges incurred. Additionally, even if the gold merchant pays tax under reverse charge for supplies from an unregistered job worker, they can still claim ITC on such taxes paid.

Prominent Advance Rulings Regarding GST on Gold

In the case of M/s Attica Gold Pvt. Limited, Karnataka AAR issued order KAR/ADRG/15/2020 on March 23, 2020.

Matter/Issue:

The gold company applicant provides spot cash for gold and releases pledged gold at the current market price registered under GST. Regarding the second-hand purchase of gold from unregistered individuals, if there’s no alteration in the type/quality of the goods:

Valuation: Is GST charged solely on the difference between the selling price and the purchase price, as stipulated in Rule 32(5) of the CGST Rules?

ITC Claim: Can the company claim Input Tax Credit (ITC) if purchases are made from dealers eligible under the scheme?

Ruling:

Valuation: Yes, if the company invoices the second-hand goods or deals with them without altering the form or type of the purchased jewelry, the valuation of the gold jewelry bought from unregistered individuals will adhere to Rule 32(5) of the CGST Rules. The GST valuation is based on the positive difference between the selling and purchase prices. However, if the purchase price exceeds the selling price, no GST is imposed. Additionally, non-availment of input tax credit is an additional condition.

ITC Claim: If the purchase of second-hand gold jewelry is from a registered person, Input Tax Credit (ITC) is attainable. In such instances, the scheme discussed above is not applicable for the gold company’s subsequent sales.

• Maharashtra AAR in the case of M/s Biostadt India Limited in order GST-ARA- 72/2018-19/B- 165 Mumbai dated 20th December 2018

Matter/Issue:

The applicant company operates in the crop protection chemicals and hybrid seeds sector. It initiated a sales incentive campaign – the Kharif Gold Scheme 2018. Simply put, the scheme offers 10 grams and 8 grams of gold coins to customers for purchases exceeding a specified quantity and for meeting minimum payment requirements, respectively. The issue raised was:

ITC Claim: Can input tax credit be claimed on the procurement of gold coins utilized for conducting sales promotion?

ITC Claim for similar schemes: Is input tax credit available for other similar schemes?

Ruling:

ITC Claim: No, input tax credit cannot be claimed for purchased gold coins. The distribution of gold coins is not the primary business activity of the taxpayer company, as per Section 16 of the CGST Act. Additionally, Section 17(5) regarding blocked input tax credit supersedes Section 16, disallowing input tax credit claims for the disposal of purchased goods as gifts. Distributing gold coins under the scheme is also considered a ‘gift’.

ITC Claim for similar schemes: No, input tax credit cannot be claimed for any other similar schemes.

FAQs 

• What is the GST rate applicable to gold in India?
  • The GST rate on gold jewelry and gold bars/coins is currently 3%.
• Is GST charged on the purchase of gold jewelry?
  • Yes, GST is levied on the purchase of gold jewelry at the rate of 3%.
• Are making charges for gold jewelry subject to GST?
  • Yes, making charges for gold jewelry are also subject to GST at the same rate of 3%.
• How is GST calculated on the sale of gold coins or bars?
  • GST is calculated on the total value of the gold coins or bars at the rate of 3%.
• Is GST applicable when selling old gold jewelry or exchanging it for new?
  • No, GST is not applicable when selling old gold jewelry or exchanging it for new, as long as it is for personal use and not part of a business transaction.