If there is one thing that the Indians love to wear and showcase, it has to be gold, the precious yellow metal. Doesn’t matter if it is the case of attending the lavish party or making grand plans for the wedding in a family, the gold occupies a permanent place in all of them.
And since we are living in the era of GST, which was implemented on July 1, 2017, it’s important to check out the impacts it will have on the gold prices and others associated with the same. Recognizing this need, we have showcased ‘GST Impact on Gold’ in this article.
A Brief on Government’s Decision with Respect to Gold
The government has decided to levy 3% GST in the gold jewellery prices, besides retaining the 10% custom duty. On the other hand, the making charges will bear 5% GST, which stands for Goods and Services Tax. Taking all that into account, the overall tax incidence comes out to be around 14%, slightly higher than about 12.4%, which was the case before the implementation of the GST.
Calculation of Tax at Pre-and Post-GST Rates
For an effective comparison between pre-and post-GST scenarios, you need to calculate the price at the rates applicable in both the cases. Gold rates fluctuate on a daily basis, but it is the range bound of 30K-33K per 10 gram (24 Carat Gold) for the last couple of months. Let’s calculate the tax incidence keeping the price at ₹32,000 in both the scenarios.
Gold Jewellery Price in Pre-GST Scenario
After the implication of 10% custom duty, the gold price must have risen to ₹35,200 in the pre-GST era. It would have risen further to ₹35,978.62 with the addition of excise (1%) and VAT (1.2%). The making charges, which accounted for 12% of the sum arrived after the imposition of the custom duty, must have stood at ₹4,224. With the addition of these charges, the price of the jewellery would have gone to ₹40,202.62.
Gold Jewellery Price in Post-GST Scenario
Since the government has retained 10% custom duty in the GST regime, the price would be the same to that of pre-GST at ₹35,200. The overall sum will then attract a GST of 3% to reach at ₹36,256. The making charges come out to be ₹4,224 (12% of 35,200). When it adds to 36,256, the resultant sum equals to 40,480, on which 5% GST is applicable. Thus, after adding the applicable GST, the price of the jewellery becomes ₹42,504.
Voice of Industry with Respect to GST Impact on Gold Jewellery
The Gems and Jewellery industry is full of praise for the GST rates decided the government, saying the move will make it an organized business and thus make the overall process transparent. As the jewellery industry is also concentrated in the rural regions, the implementation will make the unorganized players there to delve into the business of organized trade, boosting the tax collection of the country and playing a critical role in building the nation.
It is also expected that the GST will raise tax compliance and improve the traceability of transactions. However, the industry has expressed concerns regarding the custom duty of gold, which is still at a high of 10%. The industry players feel that this is the right time for the government to cut the custom duty and eliminate the unauthorized import of the yellow metal.
What an absorbing learning session we had. From knowing the nuances of tax application and charges at various stages to unfolding the impact on the overall trade, it has been a thrilling read, isn’t it? Hope you agree to the same and try to strategize your gold jewellery purchase by taking into consideration the facts explained in this article.