In the world of gold, glittering changes are on the horizon. The Indian government is set to introduce some significant adjustments to the GST (Goods and Services Tax) rules that govern the gold industry. Beginning in 2023, the way GST is applied to gold will undergo a transformation. Instead of the current system that calculates GST based on the weight and purity of gold, a fixed percentage of 4% will be the new standard.
Moreover, an innovative e-invoicing system for gold shops is on the government’s agenda. This digital system is designed to streamline invoicing procedures and simplify GST compliance for businesses in the gold sector. It mandates that gold dealers and jewellers generate e-invoices for all gold transactions, which are then uploaded onto the GST portal for record-keeping and accounting.
Understanding GST on Gold
Before we delve into the intricacies of these changes, let’s start with the basics. GST, or Goods and Services Tax, applies to India’s supply of goods and services. The GST rates for gold vary depending on the type of gold and its associated services. Knowing how these rates affect various aspects of the gold trade is essential.
The Fine Print: GST Rates on Gold
The application of GST in the gold industry can be quite detailed. Different GST rates apply to various aspects of gold, including making charges, goldsmith services, and gold import. Here’s a glimpse of some key GST rates for different aspects of gold:
- Gold Bars, Coins, and Jewelry: 3%
- Making Charges for Jewelry: 5%
- Gold Import: 10.75% (including 7.5% customs duty and 3% GST)
- Goldsmith or Silversmith Services: 5%
Impact of GST on Gold
These changes have ushered in significant consequences for the gold market. Here’s how GST on gold in 2023 is impacting the industry:
With the revised GST rates, the cost of gold has surged. The shift from 1.2% to 3% in GST rates has made gold more expensive. As a result, there has been a dip in the overall demand for gold. The increased gold prices have not only influenced the demand but have also had an impact on investment liquidity in this precious metal.
GST on Gold Jewellery:
The application of a 5% GST on making charges for gold jewellery has resulted in varying making charges across different jewellers. This variance influences the overall GST on gold coins and ornaments.
Under the Goods and Services Tax system, gold dealers must now meticulously document every transaction. This is anticipated to improve accountability and transparency in a sector where only about 30% is organised. This added scrutiny will reduce the possibility of gold smuggling and undocumented sales.
Factors like high liquidity, exchange rates, declining gold mining, and international gold prices also impact gold prices.
Free Trade Agreement Advantages:
Free Trade Agreements with countries like South Korea have granted benefits to GST-registered importers. They can now import gold without the burden of an additional 10% customs duty.
SAC Codes: The DNA of Gold Services
For the uninitiated, SAC stands for Services Accounting Code. It’s a system of codes used to classify various services under the GST regime. These codes play a crucial role in categorizing gold-related services correctly.
Here’s a quick peek at some SAC codes for recruitment services:
- SAC Code 998511: For “Executive/retained personnel search services.”
- SAC Code 998512: Covering “Permanent placement services, other than executive search services.”
- SAC Code 998513: Pertaining to “Contract staffing services.”
- SAC Code 998514: When you’re into “Temporary staffing services.”
- SAC Code 998515: For “Long-term staffing (payrolling) services.”
- SAC Code 998516: If you offer “Temporary staffing to permanent placement services.”
- SAC Code 998517: Addressing “Co-Employment staffing services.”
- SAC Code 998519: A catchall category for “Other employment and labour supply services.
Understanding these SAC codes and applying them accurately to your services is crucial for proper GST compliance in the recruitment industry.
So, as we navigate these changes in the gold industry and understand the intricacies of GST, remember that these codes are the building blocks of classification and taxation. They’re the essential digits that ensure compliance and understanding of the shifting landscape of gold and GST in 2023.
GST Calculation on Gold
To fully grasp the impact of GST on gold, it’s crucial to understand how this tax is calculated for different aspects of the gold industry.
GST on Gold Jewelry
Gold jewellery, including gold ornaments, coins, biscuits, and bars, is subject to GST. The price of gold jewellery includes the cost of extracting and processing the gold and the profit margin. However, this price also includes making charges.
Before the introduction of GST, taxes like VAT and service tax were applied to the price of gold jewellery, but they were replaced by GST. The GST calculation for gold jewellery is influenced by whether it’s considered a composite supply or not.
- GST on Gold Not as a Composite Supply: When gold is not considered a composite supply, the GST rate of 3% is applicable to the total value of the jewellery. This rate applies whether the making charges are itemised separately or not.
- GST on Gold as a Composite Supply: If the supply of gold jewellery is considered a composite supply, the applicable GST rate, including making charges, is 3%. In this case, the supply of gold is regarded as the principal supply.
Exemptions from GST on Gold
During the 31st GST Council meeting in December 2018, an exemption from GST was declared. Under this exemption, no GST is levied on the supply of gold by designated agencies to gold jewellery exporters registered under GST.
While this exemption benefits Indian gold jewellery exporters by reducing their GST burden, it does not affect domestic purchasers of gold jewellery.
e-Way Bill Rules for Gold and Its Forms
The rules regarding e-Way bills for gold have also changed. Previously, the transportation of gold in any form, including jewellery and goldsmith’s wares, did not require an e-Way bill. This was true regardless of whether the supplier or recipient was registered under GST.
However, starting from September 13, 2022, a separate window for generating e-Way bills for the transportation of gold, gold jewellery, or precious stones was introduced. These changes were based on state notifications.
Input Tax Credits for GST on Gold Business
In the gold business, jewellers and gold merchants can seek reimbursement for the Input Tax Credit (ITC) paid on raw materials, including gold and other job work expenses. Even if goldsmiths or specialists providing job work services are not registered under GST, the gold merchant or jeweller must pay GST at a rate of 5% on a reverse charge basis.
GST Exclusivity: Gold Supplies and Exporters
Gold supplies to licensed jewellery exporters have been granted exclusivity from the GST. This exemption aims to help.
India’s gold export sector competes in the global market by lowering the GST burden on gold jewellery exporters. However, licensed jewellers can claim a 2% Input Tax Credit on the costs of making jewellery.
Gold Industry Challenges
Despite expectations that GST implementation would bring greater transparency and accountability to the gold sector, some challenges persist. Suppliers have turned to unorganised gold markets, and illegal imports of raw gold have increased. These issues have arisen in the wake of the tax implementation.
Considerations Before Investing in Gold
As gold prices frequently fluctuate due to demand, supply, and currency fluctuations, the final transaction amount impacts GST on gold jewellery in 2023.
Here are some considerations to keep in mind when investing in gold:
- Hallmarked or BIS certified jewellery: Opt for hallmarked or BIS certified gold jewellery to ensure its purity and authenticity.
- Quality Matters: The price of gold is determined by its finesse. Lower-quality gold is typically available at a lower pergram price but also carries a lower value. While 24 Karat gold is of the highest quality, it is unsuitable for jewellery. Generally, jewelry is crafted using 22 Karat, 18 Karat, or 14 Karat gold.
- Separate Stone Listings: The purchase bill should include precious and semiprecious stones separately because they are subject to different tax rules.
- Price Fluctuations: The price of gold fluctuates daily and is influenced by various factors, including supply and demand, import duty, currency fluctuations, and market conditions in the Indian jewellery industry. These factors have a significant impact on gold transactions in India.
The Bottom Line
Gold is a unique commodity subject to various taxation regimes throughout its production cycle. To make a wise purchase or investment, you must be fully informed about India’s ever-evolving landscape of gold and GST. Whether you’re a seasoned jeweller, a curious investor, or someone just fascinated by the allure of this precious metal, navigating the world of gold in the context of GST can be challenging and rewarding.
So, as the landscape of gold and GST undergoes a glittering transformation, keep these insights and considerations in mind, and you’ll be better equipped to shine in the world of gold in 2023.
Frequently Asked Questions:
What will be the GST rate for gold in 2023?
In 2023, GST on gold jewellery implies a 5% tax on gold jewellery-making charges. Generally, GST on gold jewellery is either a fixed charge or a fixed gold GST percentage
What are the new gold rules in India 2023?
The sale of gold jewellery and artefacts without hallmark compliance is now completely prohibited by the Bureau of Indian Standards (BIS). Effective 1 April 2023, only items with the Hallmark Unique Identification Number (HUID) will be permitted to be sold in India.