What is GST on Gold? - GST Rate for Gold & Jewellery

What is GST on Gold?

GST  is set at 3% of the value of gold purchased. This applies various forms, such as:

• Gold bars
• Gold coins
• Gold jewellery (whether plain or studded with precious stones)
• 24-carat and 22-carat gold (or other purities)

Additionally, a 5% GST is applied on the making charges for gold jewellery, which covers the craftsmanship involved in turning the raw material into finished jewellery.

Latest Update

The Union Budget 2024-2025 has introduced significant changes to the taxation of gold and silver. The Government of India has reduced customs duties on these precious metals from 15% to 6%. This adjustment includes a reduction in the basic customs duty on gold, which has been lowered from 10% to 5%, and a cut in the Agriculture Infrastructure and Development Cess from 5% to 1%. As a result, the total taxes on gold and silver, including GST, have effectively decreased to 6%, compared to the previous 15%. Following this policy change, domestic gold prices experienced a notable decline over the past week.

GST Rates

Particulars	HSN Code	GST Rate
Precious stones (excluding diamonds) and semi-precious stones, whether worked or graded but not strung, mounted, or set	7103, 7104	0.25%
Diamonds, gold, pearls, silver, articles of jewellery (gold or silver), synthetic or reconstructed stones, unworked or simply sawn/roughly shaped	7101, 7102, 7106, 7107, 7108, 7109, 7111, 7113, 7114, 7116, 7118	3%
Job work related to cut and polished diamonds, plain or studded jewellery of gold, silver, etc.	9988	1.5%

These GST rates ensure standardized taxation across various gold and jewellery-related transactions.

HSN Code for Gold & Jewellery- HSN Chapter 71

HSN chapter 71 contains the HSN code for all types of precious metals, precious stones and gold. Gold (including gold plated with platinum) unwrought or in semi-manufactured forms, or in powder fall are classified under HSN code 7108 as under:

• HSN code for gold powder is 7108 11 00.
• HSN code for other unwrought forms of gold is 7108 12 00.
• HSN code for other semi-manufactured forms of gold is 7108 13 00
• HSN code for monetary gold is 7108 20 00
• HSN code for gold base metals or silver, clad with gold, not further worked than semi-manufactured is 7109 00 00

GST rate of 3% is applicable for all of the above HSN codes. View GST rates for all goods and services. Jewellery of precious metals or of metal clad with precious metals fall under HSN code 7113 as under: HSN code for jewellery with filigree work is 7113 11 10

• HSN code for jewellery studded with gems is 7113 11 20
• HSN code for other articles of jewellery is 7113 11 30
• HSN code for gold jewellery, unstudded, is 7113 19 10
• HSN code for gold jewellery set with pearls is 7113 19 20
• HSN code for gold jewellery set with diamonds is 7113 19 30
• HSN code for gold jewellery set with other precious and semi-precious stones is 7113 19 40

All of the above types of gold jewellery with the above HSN codes attract a 3% GST rate. Gold Coin falls under HSN Code 7118 and attracts a 3% GST rate. Imitation jewellery falls under HSN code 7117 as under:

• HSN code for imitation jewellery of base metal, whether or not plated with precious metals is 7117 11 90.
• HSN code for imitation jewellery in the form of bangles is 7117 19 10.
• HSN code for jewellery studded with imitation pearls or imitation or synthetic stones is 7117 90 10.

GST Rate on Purchases in India

Gold purchases in India are subject to a 3% GST, split equally between CGST (1.5%) and SGST (1.5%). Here's how GST applies:

• GST Rate: 3% of the taxable value, which is mentioned on the invoice.
• Offline Purchases: When gold is purchased through traditional offline channels, both SGST (State GST)and CGST (Central GST) are applied, as the transaction occurs within the same state.
• Online Purchases: If the gold is bought from an online platform and the supplier is from a different state, IGST (Integrated GST)is applicable instead.

Additional Charges

• Customs Duty: Gold imports are subject to a 10% customs duty, which has been in place prior to the implementation of GST.
• Gold Making Charges: A 5% GST is levied on the making charges for gold jewellery. This was introduced recently, whereas earlier, only VAT or service tax was applied.

Impact on Gold Prices

• With the introduction of GST, gold and gold jewellery have become marginally more expensive, primarily due to the 5% GST on making charges, in addition to the customs duty and the 3% GST on the value of gold itself.

GST Calculation on Gold Purchase

Here’s how GST is calculated for different gold transactions:

Type of Transaction	Tax Rate
Import of Gold	12.5% customs duty on the value of imported gold
Gold Jewellery Making Charges	5% GST on making charges
GST on Gold Purchase	3% GST on the value of gold purchased

These taxes are applied based on the nature of the transaction, ensuring that the appropriate GST rates are applied to each component of the gold purchase.

Example Calculation of GST on Gold

Here’s an example of how GST is calculated on a gold purchase:

Scenario:

• Gold purchased: 100 grams of 24-carat gold
• Price of gold: ₹5,000 per gram
• Making charges: ₹10,000

GST Calculation:

1. GST on the Value of Gold

• Gold value= 100 grams × ₹5,000 = ₹5,00,000
• GST on gold(3% of ₹5,00,000) = ₹15,000

2. GST on Making Charges

• Making charges= ₹10,000
• GST on making charges(5% of ₹10,000) = ₹500

Total GST Payable:

• GST on gold: ₹15,000
• GST on making charges: ₹500
• Total GST= ₹15,000 + ₹500 = ₹15,500

Total Cost for the Customer:

Total cost of gold = ₹5,00,000 Total making charges = ₹10,000 Total GST = ₹15,500 Total amount payable = ₹5,00,000 + ₹10,000 + ₹15,500 = ₹5,25,500 This is how GST is calculated on a gold purchase, considering both the value of the gold and any making charges.

GST Rate on 24-Carat Gold in India

The GST rate on 24-carat gold in India is 3% of its value. This implies that for every ₹100 worth of 24-carat gold purchased, ₹3 is payable as GST. It’s important to note that this 3% rate applies solely to the value of the gold. If making charges are added—for example, when crafting gold into jewellery—those charges are subject to a separate GST rate of 5%.

GST Rate on 22-Carat Gold in India

The GST rate on 22-carat gold in India is 3% of its value. For instance, if you purchase ₹1,000 worth of 22-carat gold, you will pay ₹30 as GST. In addition, any making charges for jewellery crafted from 22-carat gold will attract a separate GST rate of 5%. It’s important to note that the GST rate remains the same irrespective of the purity of the gold. The tax is applied to the value of the gold, whether it is 22-carat, 24-carat, or any other purity.

GST on Ready-Made Jewellery (Ornaments)

When purchasing ready-made gold jewellery, a 3% GST is levied on the total value of the jewellery. This includes:

• The price of the gold.
• The making charges associated with crafting the jewellery.

This is classified as a composite supply, where both the gold and the craftsmanship are treated as a single taxable product for GST purposes.

GST on Gold Bars and Coins

The GST rate for gold bars and coins is 3%, applied exclusively to the value of the gold. As there are no additional services or charges associated with these items, the tax calculation is simple and limited to the gold’s intrinsic value.

GST on Second-Hand Gold

The GST treatment for second-hand gold depends on the seller's status:

• Registered Dealers: A 3% GST is applicable to the sale price of the second-hand gold.
• Individuals: Individuals selling second-hand gold are typically not subject to GST, as they are not considered businesses. However, the buyer (usually a registered jeweller) is responsible for paying GST on purchasing second-hand gold.

GST on Gold Investment Schemes

Investing in gold has long been a favoured choice in India, and with the rise of various investment schemes, it’s essential to understand the GST implications. Below are the key points regarding GST on popular gold investment schemes:

• Gold ETFs (Exchange-Traded Funds) and Gold Mutual Funds: Gold ETFs and mutual funds allow investors to invest in gold without physically owning it. 18% GST is applicable on the management fees charged by the fund house for managing the scheme, but there is no GST on the underlying gold itself.
• Sovereign Gold Bonds (SGBs): Sovereign Gold Bonds are issued by the Government of India as a secure way to invest in gold. There is no GST on the purchase of Sovereign Gold Bonds as they are considered a financial security.
• Gold Savings Schemes: Many jewellers offer gold savings schemes where you deposit a fixed amount every month, and upon maturity, you receive gold or its equivalent value. GST is applicable on the making charges and any additional services provided by the jeweller, which is typically 5%. The value of the gold itself is taxed at 3% GST when you buy the physical gold.
• Digital Gold: Digital gold allows investors to buy gold in small quantities online, stored in a secured vault. A 3% GST is applicable to the value of gold when you purchase digital gold.

Understanding these GST rates helps investors make informed decisions about the costs involved in different gold investment schemes.

GST on Gold ETFs (Exchange-Traded Funds)

Gold ETFs are generally exempt from GST on the purchase of ETF units. While the underlying gold asset is subject to 3% GST, investors are not charged GST on the ETF units themselves. This means investors can buy and sell ETF units without additional GST implications.

Tax Implications

• There is no direct GST on the purchase of Gold ETF units.
• However, when selling the ETF units, investors may be subject to capital gains based on the profit made from the sale. The tax rate depends on the holding period of the ETF units:
  • Short-term capital gains tax(if held for less than 3 years).
  • Long-term capital gains tax(if held for more than 3 years).

This makes Gold ETFs a relatively tax-efficient option for investors, as the primary tax impact is from capital gains rather than GST.

GST on Gold Mutual Funds

Gold mutual funds are generally exempt from GST on the purchase of fund units. While the underlying gold asset is subject to 3% GST, investors are not charged GST on the mutual fund units themselves. This means that the purchase and sale of gold mutual fund units do not incur additional GST charges.

Tax Implications

• There is no direct GST on the purchase of gold mutual fund units.
• Investors may be subject to capital gains when selling their mutual fund units, depending on the holding period:
  • Short-term capital gains tax (if held for less than 3 years).
  • Long-term capital gains tax(if held for more than 3 years).
• Additionally, investors may face other applicable taxes based on the specific mutual fund’s tax treatment.

Gold mutual funds offer a GST-exempt method of investing in gold, with tax implications primarily related to capital gains on any profits made from the investment.

GST on Sovereign Gold Bonds (SGBs)

Sovereign Gold Bonds (SGBs) are exempt from GST on the gold value itself. Unlike physical gold, the GST is applicable only to the brokerage fee paid for purchasing the bonds. The GST on brokerage is charged at a flat rate of 18%.

Tax Implications

• Investors may be subject to capital gains tax on any profits made from selling the SGBs, depending on the holding period:
  • Short-term capital gains tax(if held for less than 3 years).
  • Long-term capital gains tax(if held for more than 3 years).
• Additionally, interest earned from SGBs is subject to taxation as income in the hands of the investor, as per applicable income tax rates.

Sovereign Gold Bonds provide a GST-exempt method for investing in gold, with tax implications primarily related to brokerage and capital gains on profits or interest earned.

GST on Digital Gold Purchase

 Digital gold platforms typically charge a 3% GST on the value of the digital gold purchased. This is the same GST rate applied to physical gold purchases. The GST is levied on the gold's value and is paid at the time of the purchase.

Tax Implications

• Capital gains tax may apply when selling digital gold, depending on the holding period:
  • Short-term capital gains tax(if held for less than 3 years).
  • Long-term capital gains tax(if held for more than 3 years).
• The taxation depends on the profit made from the sale, similar to other forms of gold investment.

Digital gold offers a convenient way to invest in gold with the same GST rate as physical gold, and investors should be aware of capital gains tax on profits when selling digital gold.

GST on Gold Exemptions

At the 31st GST Council meeting held on 22 December 2018, a GST exemption was granted for the supply of gold by a notified agency to registered jewellery exporters. This exemption is designed to reduce the GST burden on gold jewellery exporters, thereby boosting the competitiveness of India's gold export sector in the international market. Key Points of the Exemption:

• Exemption for Gold Exporters: Gold supplied to registered jewellery exporters by a notified agency is exempt from GST, which helps reduce the cost of gold for exporters.
• Input Tax Credit (ITC): Registered jewellers can claim a 2% ITC on the 5% GST charged on making charges for gold jewellery. However, this benefit applies only to exporters and not to domestic buyers.

Note: Domestic buyers are not eligible for any exemptions or relief from these provisions. The GST on making charges (5%) and the 3% GST on gold itself remain applicable to them.

e-Way Bill Rules for Gold and Its Forms

Prior to 13th September 2022, under CGST Rule 138(14), transporting gold in any form, including jewellery, goldsmith’s wares, and articles (Chapter 71), was exempt from the requirement of an e-way bill. This meant that, regardless of whether the supplier or recipient of gold was registered under GST, gold could be transported without an e-way bill. However, from 13th September 2022, as per notifications issued by various states, the National Informatics Centre (NIC) introduced a separate window for generating e-way bills for transporting gold, gold jewellery, or precious stones. This new rule requires that e-way bills be generated for such goods, ensuring better tracking and regulation of gold transportation under GST.

Availability of Input Tax Credit (ITC)

Jewellers and gold merchants are eligible to claim Input Tax Credit (ITC) on the GST paid for raw materials used in their business, such as gold, as well as for job work charges incurred. Additionally, if a gold merchant pays tax on a reverse charge basis for supplies received from an unregistered job worker, they can still claim ITC on the tax paid.

Conclusion

In conclusion, understanding the Goods and Services Tax (GST) on gold and jewellery is essential for both buyers and investors in India. With a 3% GST on the value of gold and an additional 5% on making charges for jewellery, the overall tax burden on gold purchases can impact the final cost. It’s important to be aware of the applicable HSN codes for accurate classification and taxation. While GST has streamlined the taxation process, being informed helps in making well-calculated decisions when buying or investing in gold.  

About the Author

IndiaFilings
Post By IndiaFilings.

Updated on: January 2nd, 2025