Are you thinking about GST on Gold Jewellery in India? What will be the effect of GST on Gold Ornaments price? In this article, you will find the impact of GST on Gold Industry and consumer, the difference between GST rates before and now!
Much hyped and talked ‘GST taxation framework‘ has been rolled out in the country, and going by the general trend the critics are busy analyzing GST impact on the market. Many sectors like automobile and smartphone have seen the price cut on the respective products, however, there are still many sectors which are skeptical about the GST and are demanding decrease in the tax rates.
The Government of India is taking all steps to enlighten people about the GST and is also openly addressing the fear of traders. The Gold and Silver Jewellery is one such sector under the GST regime.
GST Rate on Gold Jewellery: Earlier And Now
GST Impact on Gold Ornaments – The yellow metal much-loved by Indians has been levied three per cent under the new tax regime, around one per cent higher than what it was before. Hence, in the light of the 3 percent GST tax on gold, the prices of jewellery in India is expected to rise.
Before GST, one percent excise duty was slapped on gold and around one percent was levied by most of the states as Value Added Tax (VAT). Only Kerala used to tax gold at five per cent. The buyers in Kerala now have to spend less for gold than they have been, the state government is looking up to the Centre to cover the losses in revenue it will see once the new rates are effective.
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On the other hand, uncut diamonds have been taxed at 0.25 percent to keep the audit trail. Like gold, three per cent tax has been levied on silver and polished diamonds coupled along with making charges taken by jewellers.
Suresh Nair, Tax Partner, Ernst and Young, said, “In spite of a near vertical division, the GST Council manages a consensus on the rate of tax on gold at 3 percent. This adds on to another new tax rate under GST regime.
It would be interesting to watch the trade community reaction in the transition phase given that the GST rate in most states could be higher than the overall current effective tax rate on gold. States with higher VAT rate would be hopeful of compensation from the Centre to bridge the gap if otherwise not taken care of.”
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GOLD JEWELLERY: Before(VAT) vs Now(GST)
|VAT (Before)||GST (Now)|
|A.||Price of gold (100 gm 995, in Rs)||263636||263636|
|B.||Customs duty (10%)||26364||26364|
|J.||Making charges (12% of gold price + customs)||34800||34800|
|L.||GST on making charges (18%)||0||6264|
Total price of jewellery (K+L)
Total taxes and duties (B+D+F+H+L)
Taxes and duties as & of gold value
Effective increase in gold jewellery prices
after GST implementation
|3.24 percentage points|
Initial GST Impact On The Gold Industry
After GST in the nation, the demand for gold falls by 50-75 per cent. The price of the gold also came down, as after seven long years the loss on the Dollar decreased.
All India Gem and Jewellery Trade Federation chairman Nitin Khandelwal said, “Customers had already made their purchases in anticipation of the price rise after GST. Because of this, footfall has reduced on the stores. However, as soon as the picture becomes clear about GST, the customers will come again.”
On Monday, sales in South India declined 60 percent. South India consumes 40 percent of the country’s total gold consumption of 850-950 tons annually. The owner of Bangalore-based Sri Ram Jewels said that the market was strong enough until June 30.
He said, “The drop in sales has been 50 to 60 percent. We hope to rebound in sales after 20 days because then the wedding season will start. It is also known from the reports that gold’s retail sales have also declined.”
However, in the office of the Indian Bullion and Jewellers Association (IBJA) located in Jhaveri Bazar, Mumbai, the jewellers from the different parts of the nation are of calling indefinitely to know the effect of GST on gold price.
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IBJA National Secretary Surendra Mehta said, “Since there is a lot of confusion about GST, such jewellers from far-flung areas are calling us here and trying to understand things.” Mehta also said that GST will make Sector healthy and jewellery will not get expensive. Mehta said, “We have seen that 3 percent GST on gold jewellery will be priced at Rs 22 per gram. The jewellers are ready to handle GST issues.”
Most jewellers of Jhaveri Bazar hope that gold ornaments prices will fall in short-term, up to Rs 27,500 per 10-gram level. On the condition of anonymity, a bullion dealer said, “We expect the business to grow in Navratri. Until then we will understand the rules of GST. Gold reached a seven-week low on Monday because of the worst quarterly performance of seven years, losses in dollars and 10-year US Treasury yields climbed. This reduces interest in people about bullion.”
Spot gold dropped by 0.7 per cent to $1,233.16 an ounce, while the US gold futures for August delivery dipped $8.90 per ounce to $1,234.40. Gold got some sort of relief by the 200-Day Moving Average Charge, which climbed up to $50 an ounce and reached at seven months high.
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View Of World Gold Council On GST
It must also be noted that the World Gold Council has hailed the step to apply 3 per cent GST on gold by calling it an ‘encouraging step in the current context to stabilise the industry, it has said that with the current import duty of 10 per cent the total tax on gold is still high and will continue to have an impact on the jewellery industry. Therefore, the Council has asked to bring down the import duty on gold.
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The impact of GST including gold rate after GST bill has been discussed with all it’s length and breadths in the above blog. Still, if anyone has any query regarding the GST, can comment below, and we will sort out as soon as possible. Do put forward your views about the blog in the comment section.