Gold is more than just a shiny metal we use to make jewelry. It’s an investment, a symbol of wealth, and for many, a form of security during tough times. But did you know that buying, selling, or even trading gold comes with taxes? That’s where the Goods and Services Tax (GST) comes into play. In this blog, we’ll explain everything about GST on gold in 2024, including the tax rates, HSN codes, and how it affects you. We’ll keep it simple and easy to understand, so whether you’re a buyer, seller, or just curious, you’ll get a clear picture of how GST works on gold.
What Is GST and Why Does It Apply to Gold?
GST, or Goods and Services Tax, is a tax the government charges on almost everything you buy, including gold. Introduced in 2017, the GST replaced many older taxes and made things simpler for both businesses and customers.
Gold, being a precious commodity, is subject to this tax like other goods and services. When you buy gold, you pay a certain percentage of its value as GST. This tax is collected by the government, which uses it for running the country, building infrastructure, and providing public services.
Why Does Gold Have a GST?
Gold is considered a luxury item in many cases, especially when used in jewelry. It has significant demand both as an investment and for personal adornment. To regulate the trade of gold and prevent illegal transactions (like smuggling), the government imposes taxes like GST.
Current GST Rate on Gold in 2024
In 2024, the GST on gold remains consistent with previous years. The current GST rate is 3%. However, this rate applies differently depending on the form of gold you’re dealing with, such as gold jewelry, gold coins, or gold bullion.
- Gold Jewelry: If you buy gold jewelry, you will pay 3% GST on the value of the gold. In addition, there’s a making charge, which covers the cost of turning the raw gold into jewelry. The making charge also attracts an additional 5% GST, meaning the overall tax burden on gold jewelry can be higher.
- Gold Coins and Bullion: If you’re purchasing gold coins or bullion, the GST is a flat 3% on the value. There are no extra charges for making coins or bullion, so this is a straightforward tax.
How Does the GST on Gold Compare to Other Goods?
When you look at other luxury items, the GST rate on gold is relatively lower. For instance, goods like cars or expensive electronics often have GST rates as high as 28%. This makes gold a somewhat attractive investment, not just for its value but because it doesn’t carry a heavy tax burden.
HSN Codes for Gold in 2024
HSN, or Harmonized System of Nomenclature, is a system used to classify goods for taxation purposes. Every product sold in India has an HSN code that helps the government keep track of taxes and regulate trade.
For gold, the HSN codes you need to know in 2024 are:
- HSN Code for Gold (Unworked Gold, Bullion, and Bars): 7108
- HSN Code for Gold Jewelry: 7113
What Is the Difference Between These HSN Codes?
The difference in HSN codes is crucial because it affects how GST is calculated. For example:
- 7108 (Gold in Bullion and Bars): This is used for raw gold that hasn’t been turned into jewelry yet. When buying gold in this form, you’ll only pay 3% GST.
- 7113 (Gold Jewelry): This is for finished gold products, like necklaces, rings, or bracelets. You pay GST on both the gold content and the making charges.
Knowing these codes is important for traders, businesses, and buyers because the rate and category of tax depend on the correct classification.
Impact of GST on Gold Buyers and Sellers
For Buyers:
As a buyer, the GST you pay directly impacts how much you spend on gold. If you’re buying jewelry, the additional 5% GST on making charges can add up, making the final cost higher than just the gold price. But if you’re buying gold bullion or coins, the 3% flat GST makes it more affordable.
Here’s a simple breakdown:
- If you buy gold jewelry, you pay 3% GST on the gold value + 5% GST on the making charge.
- If you buy gold coins or bars, you only pay 3% GST on the gold value.
For Sellers and Traders:
If you’re a gold trader or jeweler, you’ll have to comply with GST rules when buying raw gold, making jewelry, or selling it to customers. You can claim input tax credit (ITC) for the GST paid on raw materials, but you’ll still need to charge your customers the appropriate GST on the final product.
GST vs. Custom Duties and Other Taxes on Gold in 2024
While GST is the primary tax on gold, it’s not the only one. Importing gold into India also attracts customs duty. In 2024, the customs duty on gold is around 12.5%, and this is paid on top of the GST.
Here’s How It Breaks Down:
- Imported Gold (Customs Duty): 12.5%
- GST on Imported Gold: 3%
This means, when gold is imported into the country, it’s taxed twice—once with customs duty and again with GST. This significantly raises the cost of gold, making it more expensive for buyers.
Making Charges and GST: How They Affect Your Final Gold Price
The making charge is what you pay the jeweler for crafting the gold into a piece of jewelry. This charge is separate from the value of the gold itself, and the GST rules treat it differently.
- Making Charges GST Rate: 5% of the total making charge.
- Example Calculation: If your gold jewelry has a making charge of ₹10,000, you’ll pay 5% GST on that, which adds ₹500 to your total bill.
So, when you buy gold jewelry, you’re not only paying for the gold but also for the craftsmanship—and both are taxed!
How to Calculate GST on Gold Purchase?
Calculating GST on gold is simple once you know the rates and values. Here’s a quick example:
Let’s say you’re buying 10 grams of gold jewelry at ₹5,000 per gram, and the making charge is ₹500 per gram.
- Value of gold: ₹5,000 x 10 grams = ₹50,000
- GST on gold: 3% of ₹50,000 = ₹1,500
- Making charge: ₹500 x 10 grams = ₹5,000
- GST on making charge: 5% of ₹5,000 = ₹250
Total cost: ₹50,000 + ₹1,500 (GST) + ₹5,000 (making charges) + ₹250 (GST on making charges) = ₹56,750
So, for gold jewelry worth ₹50,000, you would pay ₹6,750 in taxes and charges.
Impact of GST on Gold Investments in 2024
Gold is a popular investment in India, often used to hedge against inflation or currency fluctuations. But how does GST affect these investments?
- For Small Investors: If you’re buying gold as an investment, GST may not be a huge concern. The 3% tax is relatively low compared to other goods, so gold remains an attractive option for wealth preservation.
- For Large Investors and Traders: For those buying gold in bulk or trading professionally, GST adds a layer of cost that can affect profit margins. However, you can claim input tax credit (ITC) on the GST paid when selling gold, which helps reduce some of the tax burden.
GST on Digital Gold in 2024
With the rise of technology, many people are investing in digital gold instead of physical gold. But does GST apply to digital gold?
Yes, it does. When you buy digital gold through platforms like Paytm, Google Pay, or other apps, you still pay 3% GST on the value of the gold. Since digital gold is stored and backed by physical gold, the same GST rules apply.
What the Future Holds: Will GST on Gold Change?
While the GST on gold has remained stable at 3% for several years, it’s always possible the government might revise these rates in the future. Some industry experts have suggested reducing GST to make gold more affordable, while others believe it should stay the same to discourage excessive gold imports and smuggling.
However, as of 2024, there’s no official word on changing the GST rates for gold.
Key Takeaways for GST on Gold in 2024
- GST Rate on Gold: 3% on gold value, plus 5% on making charges for jewelry.
- HSN Code for Gold: 7108 for gold bullion and 7113 for gold jewelry.
- Customs Duty: 12.5% on imported gold, making it more expensive.
- Total Cost Calculation: GST is a key factor, but making charges also contribute to the final price.
- Impact on Investment: GST doesn’t significantly impact small investors, but larger traders must account for the tax in their business strategy.
Conclusion
Understanding GST on gold is crucial for anyone buying or selling this precious metal in 2024. With a consistent 3% GST on gold value and additional taxes on making charges, knowing how these rules work can help you make smarter purchases and investments. By staying informed about HSN codes, tax rates, and the overall impact of GST, you can better navigate the gold market this year and beyond.
Gold may shine, but taxes like GST ensure that its glitter doesn’t go unregulated!