The implementation of GST on gold has provided a large-scale impact on the consumers and producers. The price change is quite noticeable. However, the government levied the Goods and Service Tax at a rate of 3% on gold jewellery. However, the tax depends upon the type of gold.
Earlier the GST on gold got fixed at 3%. But with time, an additional 8% of tax was levied on the making charge. Along with that, there are other criteria also, including the imports and the type of sector.
Impact on gold
Before implementing the Goods and Service Tax, the people had to pay at least one per cent of the service tax along with one per cent of the value-added tax. Hence, you have to pay a total of 2% of tax.
But while making the GST tax payment, you need to pay a total of 3% tax. It makes the metal quite expensive. In addition to that, a 10% import duty has been introduced. Due to this, the import rates of gold increased. Hence if anyone plans to purchase gold, this is not the possible time to do so. Even trading in gold is also not advisable. Due to the rising price, the demand for gold is reducing day by day.
In the organized sector, 700 to 800 tonnes of gold happens to be imported. Out of which 30 tonnes of gold get imported illegally. To be specific, it gets smuggled primarily through countries like the Middle East. It comprises the organized sector. However, after the rate of gold increased, smuggling became quite more common and regular than before. It is where several merchants are appealing to the government for reducing the import duty on this metal. Also, with the reduction, the seller would be able to record every transaction. It will improve the accountability and authenticity of the metal to a certain extent.
Are there any kinds of exemptions?
An exemption was announced on the 22nd of December in the year 2018. Accordingly, the government cannot charge GST on the supply of gold made to the notified agency. This move has shown the depreciation of Goods and Service Tax on the Indian importers of gold jewellery. But due to this, domestic buyers of gold jewellery do not experience any impact. The jeweller or the gold merchant can also claim the input tax credit that they pay for the raw materials. It includes the different kinds of job work and the cost of the gold. It makes him eligible to clean for the input tax credit on that kind of tax.
Effect of GST on gold making
Previously the government fixed the making charge at 12%. But that comes with adding another 12% of the customs taxes. However, introducing the Goods and Service Tax on the making charges of gold jewellery fixed the cost at 18%. But after the revision of the decision due to criticism, the rate got reduced to 5%. Due to this, the gold industry did not get any adverse effects because of implementing the Goods and Service Tax. But it had an adverse effect because of the unorganized sectors that illegally imported gold.
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In conclusion to this, the Goods and Service Tax on gold somehow increased the burden on the consumers. The added cost has been passed on to them, and due to which, the total cost of the product increased exorbitantly. But with the decrease in the tax, the consumers now have to pay a total of 4% tax. Jewellery bodies and councils have also fought for the change in the tax rate. The government has provided transparency in importing and exporting gold manufacturing units.