Here we will see GST rates on hallmarking charges for gold jewellery in India in 2023. We discuss the recent updates in GST rules for gold, their implications, and the impact on the cost of jewellery for consumers. Additionally, we provide insights into GST calculations, exemptions, and important considerations for buying gold jewellery.
The Indian government’s recent proposal to change the Goods and Services Tax (GST) rules for gold in 2023 has sparked curiosity and concern among consumers and the jewellery industry. Previously, GST on gold was calculated based on the weight and purity of the gold sold. However, from 2023, a significant shift will occur: GST on gold will be a fixed percentage of 4%, regardless of these factors. Moreover, a new e-invoicing system for gold shops will simplify GST rate of Hallmark charges.
Impact on the Gold Industry
These changes have far-reaching consequences for the gold market. Firstly, they have led to an increase in the price of gold, making it more expensive. The GST rate on gold has risen from 1.2% to 3%, affecting its demand and influencing investment decisions.
For gold jewellery, the GST rate in 2022 stood at 5% on making charges. However, GST rate on hallmark charges can vary among jewellers, impacting the overall GST on gold coins and ornaments. This has led to fluctuating prices and, at times, a lack of transparency.
One notable effect of GST on gold is the improvement in transparency. Gold dealers are now required to record every transaction, potentially reducing unaccounted gold sales. This move is particularly significant as a substantial portion of the gold market remains unorganized.
Understanding GST on Gold
To understand how GST impacts the overall cost of gold jewellery for consumers, let’s consider an example:
Suppose you purchase 10 grams of gold at ₹4,500 per gram, totalling ₹45,000. Additionally, making charges are ₹500 per gram, amounting to ₹5,000. With a GST rate of 5%, GST on making charges equals ₹250. Thus, the total cost of jewellery after GST is ₹50,250.
Comparison of Gold Prices Before and After GST
Before the implementation of GST, the cost of gold jewellery included VAT, sales tax, and other charges. After GST, while VAT and sales tax have been replaced, GST now affects the price. However, import duty remains at 7.5%, resulting in a total Goods and Service Tax and duty implication of 10.5%.
GST Rates on Gold Purchase and Making
Under GST, the sale of gold ornaments to individuals is considered a composite supply of goods and services. The GST rate of 3% applies to the total value of the jewellery, regardless of whether making charges are itemised separately. Goldsmiths providing job work services are subject to a GST rate of 5%.
Exemptions and e-Way Bill Rules
An exemption from GST has been granted for the supply of gold by designated agencies to gold jewellery exporters registered under GST. While this benefits exporters, domestic purchasers of gold jewellery do not enjoy this exemption.
For the transportation of gold, the e-way bill rules have evolved. As of September 13, 2022, a separate window for generating e-way bills specifically for gold, gold jewellery, or precious stones has been introduced.
Input Tax Credits for GST on Gold Business
Jewellers can seek reimbursement for Input Tax Credits (ITC) paid on raw materials like gold and related expenses. Even when taxes are paid on a reverse charge basis for supplies from unregistered job workers, ITC can still be claimed.
Suppliers Turning to Unorganised Markets
Despite expectations that GST implementation would bring transparency and accountability to the gold sector, some suppliers have turned to unorganized markets and illegally imported raw gold.
GST Calculation on Gold
| Particulars |
Before GST (₹) |
Under GST (Not as a composite supply) (₹) |
Under GST (As a composite supply) (₹) |
| The 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 |
Considerations Before Buying Gold Ornaments
Before purchasing gold jewellery, consider the following:
- Opt for hallmarked or BIS-certified gold jewellery for purity.
- Differentiate between precious and semi-precious stones on your purchase bill, as they have different tax rules.
- Note that gold prices fluctuate daily due to various factors.
Popular Advance Rulings on GST on Gold
We provide insights into two popular advance rulings on GST for gold, offering clarity on valuation, Input Tax Credits, and other aspects.
Conclusion
In conclusion, the recent changes in GST rules for gold in India have significant implications for consumers and the jewellery industry. Understanding these changes, considering GST rate of hallmark charges calculations, and making informed decisions when purchasing gold jewellery is essential for navigating the evolving gold market. Stay informed, seek expert advice, and always opt for hallmark-certified gold to make wise investment choices in the Indian gold market in 2023.
