With the launch of goods and service tax, several commodities have been impacted, including gold items. The GST on gold is 3% as per the Government. However, this tax rate depends on several factors like the gold type, imports, and the sector it belongs to (organised or unorganised).
Therefore, it is vital to know everything about gold’s goods and service tax before purchasing it physically or digitally.
Impact of GST on gold jewellery
Under the traditional taxation system, buyers needed to pay 1% as service tax and VAT each. Therefore, they had to pay 2% extra above the selling price of purchased jewellery.
However, under the current tax regime, the gold tax rate is 3% making it more expensive for buyers. This GST charge depends on the total value of purchased gold items and their making charges. For example, if a gold ornament’s price is Rs.50,000 per 10 gm, and its rate of making charges is 10%,its total cost will be Rs.50,000 + 10% of Rs.50,000, that is Rs.55,000. Now, as the GST rate is 3%, the final amount will be Rs.56,650.
Alternatively, a GST calculator for buyers will quickly compute the tax amount one needs to bear while purchasing goods and commodities.
Impact on gold imports
Apart from 3% GST on gold, there is an import duty of 12.5% on it. Therefore, individuals planning to purchase imported gold items need to bear more than before. Similarly, trading in gold is also not advisable because rising gold prices have decreased gold demand, affecting the liquidity of such an investment.
Further, in gold exchange-traded funds (ETFs), a payment of GST is initiated back to the investors as fund houses take input credit.
Effect of GST on unorganised sectors
Import of about 800-900 tonnes of gold occurs annually, and around 200-300 tonnes are smuggled. This smuggling of gold items is done especially by unorganised sectors.
With the rise in gold rates, chances of illegal import or smuggling of gold items will also increase. Therefore, several merchant associations have been appealing to the Government to reduce the import duty on gold items.
GST effect on organised sectors
Ideally, with the rolling out of GST, the organised sector is said to increase accountability and transparency. However, due to debate among experts, this rate was reduced to 5%.
Therefore, this is one of the several ways GST affects gold jewellery.
Effect of GST on gold making charges
Previously, there was a fixed making charge rate of 12% along with 12% customs. However, under the GST regime, the rate of making charges was reduced to 5% when the initial rate of 8% received criticism.
Therefore, to understand the latest impact of GST, it is important to focus on products like gold which has a widespread demand.
Further, it is evident from the above section that gold imports and unorganised sectors are majorly affected by the entry of GST. To that cause, small business owners can secure a business loan to meet their various expenses that will help in sustaining the business.
Reputed financial lenders provide a sizeable loan amount at lower interest rates along with pre-approved offers for a seamless loan application process. You can check your pre-approved offer by submitting basic details like your name and contact number.
Nevertheless, in the Budget 2021, the Government announced a reduction in customs duty on gold bars from 12.5% and 11.85% to 7.5% and 6.9%, respectively. This will reduce the retail prices and make exports competitive. As a result, smuggling gold items can decrease.
To conclude, knowing these facts on rates of GST on gold will help an individual understand the market trends and how it may change in the future and make its purchase hassle-free.