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Here’s How You Can Calculate GST on Gold Jewellery 

Housing Finance Guide 24-11-2022 | 5 mins read

The Goods and Services Tax (GST) became effective on July 1, 2017. GST impacted the prices of many goods. Gold is one of the commodities to undergo price changes due to GST. Different gold GST rates became applicable in phases. These included the stages of manufacturing, supply, and distribution. Therefore, it is necessary to understand the final impact of GST on gold jewellery. In India, investment in gold is widely prevalent. Also, one must note that GST on gold jewellery is different for the import, purchase, and manufacture of gold. But GST is not payable when you sell gold jewellery and buy new jewellery. 

What Effect Does GST Have On Gold?

Before GST, if you purchased gold, you had to pay 1% of service tax and value-added tax (VAT) on it. So, you had to pay a total of 2% over the cost of the purchase. But now, after the implementation of GST, all other taxes have been discarded. Now, a rate of 3% is applicable on gold purchases. Further, a rate of 5% is applicable on making charges. It has made gold purchases costlier for consumers. Let us understand how to calculate GST on gold jewellery. 

How To Calculate GST On Gold Jewellery? 

The billing system for gold jewellery is different for every jeweller. There is no standard invoice for GST on gold jewellery. 

It is vital to understand that the final price of any gold jewellery is the sum of the following: 

Weight of gold * daily rate of 10 gm gold + charges for making and wastages + applicable GST on gold jewellery 

Take a look at the following example. It explains the calculation of GST on gold jewellery. To check the change in price, we will calculate the pre and post-GST charges. 

Scenario 1

Service tax and VAT are applicable on gold jewellery

Suppose you purchase 20 grams of gold. 

 Applicable TaxPrice
Cost of 20 gm goldINR 1,00,000
Add: Custom Duty10%INR 10,000
Add: Service Tax1%INR 1,100
Add: VAT1.2%INR 1,333.20
Add: Making charges10%INR 11,000
TotalINR 1,23,433.20

Scenario 2

GST is applicable on gold jewellery

 Applicable TaxPrice
Cost of 20 gm goldINR 1,00,000
Add: Custom Duty10%INR 10,000
Add: GST on gold3%INR 3,300
Add: Making charges10%INR 11,000
Add: GST on making charges5%INR 550
TotalINR 1,24,850

It is evident how GST has increased the overall price of gold jewellery.

Below are the steps to calculate GST on gold jewellery. 

Step 1

Check the rate of gold on that day for the desired carat. 

Step 2

Determine the quantity of gold that you want to purchase 

Step 3

Consider the rate of making charges; usually, it stands at 10%. 

Step 4

Apply a 3% GST rate to the purchase price of gold.Consider the combined cost of gold plus the making charges for this purpose. 

Step 5

Arrive at the total cost of the purchase of gold. It is the sum of making charges, GST, and the cost of gold. 

What Are the Different Gold GST Rates? 

If you purchase new gold jewellery, you will pay the following taxes:

  1. A customs duty of 10% on the import of gold
  2. GST of 3% on the cost of gold jewellery 
  3. GST of 5% on making charges for gold jewellery

As a consumer, you must pay 3% GST on finished or unfinished gold items. The cost of producing gold jewellery further attracts 5% GST. 

A rate of 0.25% is applicable to precious and semi-precious stones. These stones do not include diamonds. They may be mounted or temporarily strung. The rate of 3% is applicable to all other jewellery, including the following:

  • Diamonds
  • Pearls
  • Gold 
  • Silver
  • Gold Jewellery 
  • Synthetic stones
  • Reconstructed stones 
  • Unworked stones 

A rate of 1.5% is applicable across the following: 

  • Diamonds that are cut and polished 
  • Studded gold 
  • Plain gold 
  • Silver 
  • Metal jewellery 

Things to Consider Before Purchasing Gold Jewellery 

Every Indian household dreams of purchasing gold as an investment. But you should remember a few important things. 

  • Gold prices fluctuate from time to time.Factors like import duty, demand, supply, and foreign exchange rates impact these prices. These, along with the gold GST rate, affect the purchase price of gold. 
  • The gold GST rate is different for precious and semi-precious stones. Rightfully, a purchase bill should specify both separately. 
  • It is best to purchase hallmarked gold jewellery. It provides assurance about the purity of the gold. 
  • GST on gold jewellery differs for different qualities of gold. For crafting jewellery, most jewellers use 22-karat or 18-karat gold. 

Conclusion

By now, you must have understood what the gold GST rate is. The above examples explain how to calculate the purchase price of gold. Many factors impact the final purchase price of gold jewellery. These include the weight of gold, the purity of gold, the making charges, and the applicable rates of GST. Often, the rates of gold differ from one part of the country to another. Therefore, there can be a difference in the purchase price of gold jewellery.

It is possible to bargain on the making charges for gold jewellery. But there is no scope to bargain when it comes to the payment of GST. It is important to note that the calculation of the gold GST rate is made on the basis of the combined price of gold and making charges. Want to know more about purchasing gold as an investment? Head to Piramal Finance. It is the premier destination on the web for all financial information. You can read more blogs about the best investment proposals or know more about easy finance solutions, like personal loans or credit cards. Start your investment journey here to build your wealth. 

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