With the introduction of Goods and Service Tax (GST), various segments of the market were restructured. The yellow metal commonly called Gold was impacted too. The product cycle of Gold attracts GST rates at different levels. Be it manufacturing or purchasing, GST is applicable.
In this article, we will discuss the impact of GST on Gold.
With the introduction of GST, the value of Gold has increased by approximately 0.75%. Before the GST era, Gold was taxed at 2% (1% as VAT and 1% as Service Tax).
The government has notified that GST will be levied at 3% on gold purchased. However, this GST rate will vary depending on the type of gold, the mode of trade (domestic/imports) and the sectors (unorganised or organised) involved.
- GST will be charged at 3% on the value of gold and the making charges.
- The making charges attached to the jewellery will be taxed separately under GST at 5%.
- When an Individual sells his/her old jewellery to a jeweller, the jeweller will not be liable to pay tax under Reverse Charge Mechanism(RCM) on such purchases.
- If an unregistered supplier of gold ornaments sells such ornaments to a registered supplier, the registered supplier will have to pay GST under RCM.
- If the job worker is registered under GST, he/she will have to pay GST at the rate of 5% on the job work charges only.
- The jewellery manufacturer can take credit of the GST paid on job work charges. In other words, the manufacturer can utilise the credit of GST for the payment of GST on the outward supply of the manufactured jewellery.
- However, if the job worker is not registered under GST, the jewellery manufacturer will have to pay GST on the input supply received from the job worker on a reverse charge basis. The manufacturer can avail the Input Tax Credit (ITC) of the tax paid under the reverse charge mechanism.
Gold jewellery sold by an unregistered supplier will be taxed under the reverse charge mechanism. This provision was introduced to prevent illegal trading of gold.
- When GST registered entities import Gold, they will be liable to pay IGST on such imports.
- In addition to the basic customs duty, IGST at 3% is payable on all imports of precious metals. The importer can avail ITC of the IGST paid.