GST Impact on Gold and Silver
Last Updated : July 30, 2020, 2:14 p.m.
On July 1, India’s labyrinth of taxes have found their exit gate from India’s economic system which as a result has been takenover by a simple, nationwide Goods & Services Tax(GST). This is the biggest tax reform since India’s liberalization in the early 1990’s. For gold lovers, gear up yourself to pay extra charges on gold as it is slated to witness an increase in the gold prices marginally. This follows the decision to implement a 3% tax on the yellow metal. This transformation period is likely to bring a positive net impact on the gold industry as the gold supply chain will become more transparent and efficient which could boost economic growth in the sustenance of gold demand.
Post GST propels the industry to charge 3% tax on the gold prices and the same effect goes on silver as well. This 3% tax reflects a minor increase on the current rate of 2%(1% Excise duty +1% VAT) being applicable on gold. This 1% rise is all set to pass on to the customer. Let’s clearly understand the impact of GST on gold rates on a simple level.
Example : Mrs. Renu Roy has bought gold worth ₹ 100 for which she has paid 3% GST i.e. ₹ 3. The total cost comes out to be ₹ 103. Now after six months, she wishes to sell this gold and presuming the gold price remaining constant, she will only get ₹ 100 and the GST amount would be bygone at the consumer level.
In the above example, you can clearly see the immediate impact of GST on the investment buying of gold by the customer as the resale value will fall down by 3 %.
No pan card required for jewellery purchase exceeding ₹ 50 K
It’s the time to cheer for every customer who is looking forward to buying jewellery. No matter whether you buy gold, silver or any other jewellery, now you don’t need to give income tax permanent account number(PAN) details for jewellery purchases exceeding ₹ 50,000. This declaration has been taken by the government during 22 nd GST Council meeting which offered much respite to those jewellers who have a turnover of ₹ 2 crores or more in a financial year for not covering them under PMLA (Prevention of Money Laundering Act, 2002). Moreover, the traders covered under PMLA have to keep the records of all transactions worth exceeding ₹ 10 lakhs, inclusive of all cross-border wire transfers exceeding ₹ 5 lakh along with the sales of immovable property worth ₹ 50 lakhs or more.
According to the sources, the income tax act permits the cash sales of upto ₹ 2 lakhs without any KYC details but the PMLA norms regulate the sales in any composition to ₹ 50,000 without any proof of PAN, driving licence, Aadhaar or passport copy.
GST effect on Gold Jewellery
Prepare yourself to shell out an extra price towards buying your favourite gold jewellery as GST start off its journey with the import duty to be levied further thereby replacing the excise duty and VAT components.
If you recall prior to GST, the overall tax rate on gold jewellery stands out to be 12.2%. This is actually made up of 10% customs duty, 1% excise duty and 1.2% VAT. Now you have to pay an additional 5% GST on making charges at the time of buying the jewellery and overall total taxes and duty sum up in the range of 18 per cent tax bracket. This input tax credit applied to the jeweller manufacturers will somehow get passed on to the final consumers. Let’s understand the applicability of GST on gold jewellery, assuming gold price to remain unchanged.
Table showing GST Effect on Gold Jewellery
| S.No. | Particulars | Without GST | With GST |
|---|---|---|---|
| A | Price of 24K Gold (100 gm) as on August 3, 2020 | INR 5,35,100 | INR 5,35,100 |
| B | Custom Duty (10%) | INR 53,510 | INR 53,510 |
| C | A+B | INR 5,88,610 | INR 5,88,610 |
| D | Excise (1%) | INR 5,886.10 | INR 0.00 |
| E | C+D | INR 5,94,496.10 | INR 5,88,610 |
| F | VAT(1.2%) | INR 7,133.95 | INR 0.00 |
| G | E+F | INR 6,01,630.05 | INR 5,88,610 |
| H | GST(3%) | INR 0.00 | INR 17,658.30 |
| I | G+H | INR 6,01,630.05 | INR 6,06,268.30 |
| J | Making Charges(12% of Gold Price + Custom Duty) | INR 70,633.20 | INR 70,633.20 |
| K | I+J | INR 6,72,263.25 | INR 6,76,901.50 |
| L | GST on Making Charges at 5% | INR 0.00 | INR 3,531.66 |
| M | Total Price of Jewellery (K+L) | INR 6,72,263.25 | INR 6,80,433.16 |
| N | Total Taxes & Duties (B+D+F+H+L) | INR 66,530.05 | INR 74,699.96 |
| O | Total Taxes & Duties on Gold per 10 Gram | INR 6,653 | INR 7,469 |
GST effect on Silver
Let’s examine the GST effect on Silver by understanding from an example. Mr. Sohan wishes to buy 100 gm Silver worth ₹ 3,860. With levy of 10% customs duty, 1 % excise duty, 1.2% VAT and now 3% GST along with 5% making charges, you will clearly be able to spot the changes applicable on the purchase of Silver jewellery by Sohan pre and post- GST.
Table showing GST Effect on Silver Jewellery
| S.No. | Particulars | Without GST | With GST |
|---|---|---|---|
| A | Price of silver (100 gm) as on August 3, 2020 | INR 6,513 | INR 6,513 |
| B | Custom Duty (10%) | INR 651.30 | INR 651.30 |
| C | A+B | INR 7,164.30 | INR 7,164.30 |
| D | Excise (1%) | INR 71.64 | INR 0.00 |
| E | C+D | INR 7,235.94 | INR 7,164.30 |
| F | VAT(1.2%) | INR 86.83 | INR 0.00 |
| G | E+F | INR 7,322.77 | INR 7,164.30 |
| H | GST at 3% | INR 0.00 | INR 214.93 |
| I | G+H | INR 7,322.77 | INR 7,379.23 |
| J | Making Charges (12% of Silver Price + Custom Duty) | INR 859.716 | INR 859.716 |
| K | I+J | INR 8,182.49 | INR 8,238.95 |
| L | GST on Making Charges at 5% | INR 0.00 | INR 42.99 |
| M | Total Price of Jewellery (K+L) | INR 8,182.49 | INR 8,281.94 |
| N | Total Taxes & Duties (B+D+F+H+L) | INR 809.77 | INR 909.13 |
