GST on Gold: Impact of GST On Gold Jewellery 2024

In India, gold is considered not just a precious metal, but it represents prosperity, luck, and tradition. Gold ornaments are used not only for personal use but have many other commercial uses too. It is a reliable and stable source of investment in India. To this day, the country remains the largest consumer of gold in the world. However, the implementation of the GST has a great impact on the trade of gold. This precious metal attracts GST rates on diverse levels, from manufacturing to the buying process.

Let’s understand more about GST on gold and how it impacts gold jewellery in 2024.

What Is GST On Gold?

GST refers to the Goods and Services Tax charged on the import, buying, and selling of gold in India. It is an indirect tax that has replaced diverse types of indirect taxes in the gold-buying process. Under the GST rule, different rates are applied to various aspects of gold, including goldsmith services, making charges, and imports. However, some financing solutions, such as gold loans, are exempted from GST.

The interest rates imposed on gold loans are free from the GST regime. However, it is important to calculate gold loan eligibility to make a well-informed decision.

Impact of GST on Gold

The GST implementation has brought some major consequences for the gold market in India. By presenting a unified tax structure, GST has changed the way gold is taxed at different stages, from manufacturing to buying and importing. It has impacted the market of gold jewellery in the following ways.

Increased Cost of Gold

With the new regime of GST rates, the price of gold has increased. The price hike from 1.2% to 3% has made gold items more expensive, resulting in a decline in the overall demand for gold in India. The increased cost of gold has also impacted the investment liquidity in gold.

Enhanced Transparency

The new GST regime makes it mandatory for gold dealers to precisely document every transaction. This will result in improved accountability for the gold trade in the market. In a sector where just 30% is considered organised, the GST system is predicted to enhance the transparency in gold dealings. This additional factor will decrease the chances of undocumented sales and gold smuggling.

Economic Significance

The rate of GST is directly related to the economic growth of the industry. Alterations in tax rules can impact the financial aspect that comes in from gold trade, affecting the way business contributes to the economy. However, a balanced approach between the industry’s functionalities and tax rules is required to maintain a robust gold market.

Free Trade Agreement

One of the benefits of new GST systems on gold is a free trade agreement, which means dealerships can import gold without customs duty. Importers with GST registration can attain gold from nations like South Korea without a 5% customs duty.

Boost to Organised Sector

GST is boosting the organised sector in the gold industry. With fair gold dealings and a simplified tax regime, the GST implementation has led to better customer assurance in buying gold from organised vendors. Retailers in the organised sector offer quality assurance, uniform pricing, and an increased customer experience, thus attaining a competitive edge.

Other Factors

While GST plays a major role in increasing gold prices, other factors such as reduced gold mining, exchange rates, high liquidity, and a rise in international gold rates affect the price range of gold.

Calculating GST for Gold

Calculating Goods and Services Tax on gold is a simple process. For calculation, you have to understand the GST rates applied to various factors of gold. It is calculated as a percentage of the gold cost, which involves additional costs like making charges, etc. Here are the steps you can follow to calculate the GST on gold.

• Know the total cost of the gold item, including any extra charges imposed on it.
• Multiply the total value of gold by the pertinent GST rate of 3% to analyze the GST charge.
• Include the GST charge to the total value of the gold transaction to get the final price.

Businesses involved in the dealing of gold need to be updated about these rates and follow the correct procedures.

Suggested Read: GST ON GOLD LOAN INTEREST – HERE’S WHAT YOU SHOULD KNOW

GST on Gold Loan

The gold loan interest rates are based on several factors such as mortgage amount, repayment period, gold quantity, financial lenders, quality of gold, etc. It is compounded with goods and services tax applicable on that interest rate, ranging between 2% and 3%. However, selecting a good financial service provider can help you get a gold loan at a low interest rate and nominal GST charges.

Muthoot Finance, one of the most trusted financial services companies offers the highest per gram rate for a gold loan. Visit your nearest Muthoot Finance branch to know more.