GST Effect on Gold Jewellery
After hearing word Gold we draw our attention to Gold jewellery & ornaments. But today we will discuss the effect of GST (Goods & Services Tax) on Gold jewellery.
Indians and specifically women of India are very much found of gold jewellery. After the implementation of Goods and Services Tax on 1st July, 2017, the price of gold has seen some fluctuations due to the additional tax burden.
In earlier tax system, 1% service tax was levied on the gold and 1% VAT was being levied, totaling up to 2%, however, after Goods and Service Tax, the GST was levied at 3%. The said taxes are over and above 10% import duty being payable at the time of import of gold. Thus the introduction of Goods and Service Tax has added on the tax burden on gold.
GST RATES ON GOLD JEWELLERY-
Under chapter 71 of GST Act, Gold jewellery is classified and GST is levied @3% on gold and @5% on jewellery making charges.
GST ON GOLD MAKING CHARGES –
In the case of jewellery, two charges are levied that is an amount of gold and jewellery making charges. As seen above, the rates of both the gold and making charges are different. Now the question would arise, whether to charge 3% or 5% or to charge 3% on gold value and 5% on making charges.
3% GST is payable on entire transaction value (i.e. gold value + making charges) and the position remains same even if the making charges are separately mentioned in the invoice or not.
SOME POINTS ON APPLICABILITY OF GST ON OLD GOLD JEWELLERY–
There had been confusion regarding the applicability of the reverse charge mechanism in case the jeweller purchases old gold jewellery from the customer. The said confusion has been clarified by the board vide press release.
It has been clarified that the sale of old gold jewellery by the customer is for a consideration, however, the same cannot be said to be in the course or furtherance of business.
The reason being for the same is very simple that selling of old gold jewellery is not the business of the individual and hence the said transaction does not qualify to be a “supply” as states in the definition of “supply” and hence it will not attract any provisions of GST and hence no tax is payable on a reverse charge basis by the gold jewelers.
However, there is one important point that if the old gold jewellery is sold by the unregistered supplier to the registered supplier, provisions of the reverse charge mechanism are applicable and tax is payable accordingly by the register supplier.