After hearing the word “gold”, we draw our attention to gold jewellery & ornaments. In this article, we shall discuss the effect of GST (Goods & Services Tax) on gold jewellery.

Indians and specifically women of India are very much fond of gold jewellery. After the implementation of Goods and Services Tax on 1st July, 2017, the price of gold has seen some fluctuations due to the additional tax burden.

In earlier tax system, 1% service tax was levied on the gold and 1% VAT was being levied, totaling up to 2%, however, after Goods and Service Tax, the GST was levied at 3%. The said taxes are over and above 10% import duty being payable at the time of import of gold. Thus, the introduction of Goods and Service Tax has added on the tax burden on gold.

1. GST Rates on Gold Jewellery

Under chapter 71 of GST Act, gold jewellery is classified and GST is levied @3% on gold and @5% on jewellery making charges.

2. GST on Gold Making Charges

In the case of jewellery, two charges are levied that is, the amount of gold and the jewellery making charges. As seen above, the rates of both the gold and making charges are different. Now, the question that would arise is: Whether to charge 3% or 5% or to charge 3% on gold value and 5% on making charges? 3% GST is payable on entire transaction value and the position remains same even if the making charges are separately mentioned in the invoice or not.

3. Some Points on Applicability of GST on Old Gold Jewellery

There had been confusion regarding the applicability of the reverse charge mechanism in case the jeweler purchases old gold jewellery from the customer. The said confusion has been clarified by the board vide press release.

1. It has been clarified that the sale of old gold jewellery by the customer is for a consideration, however, the same cannot be said to be in the course or furtherance of business.

2. The reason being for the same is very simple that selling of old gold jewellery is not the business of the individual and hence the said transaction does not qualify to be a “supply” as states in the definition of “supply” and hence it will not attract any provisions of GST and hence no tax is payable on a reverse charge basis by the gold jewelers.