No matter how much the price of gold soars, the love for the yellow metal never fades away. In India, gold is uniformly loved across the country, be it in any form – Physical gold, digital gold, gold bonds, gold exchange-traded funds (ETFs). People need an excuse to buy gold which can be marriage, gifting purpose, Akshay Tritiya, Dhanteras, or some other auspicious days. So, if you are planning to buy gold, apart from the making charges, you should keep the taxes in mind. When you buy gold you have to pay GST on the gold as well as the making charges.
What is GST on gold?
GST is imposed on individuals when they purchase gold jewellery. Subsequently, they have to pay GST on making charges as well. But, in case ou are selling off your old gold and using that money to purchase new jewellery, you don’t have pay the GST in that case. After the introduction of the GST rate on gold, the precious metal has become expensive by at least 0.75%.
Calculation of GST on gold jewellery
On gold jewellery, a GST of 3% is levied. For example, if you are buying a gold ornament at the price of ₹50,000 per 10 gm and the making charges are at the rate of 10%, then the total cost after making charges will be ₹50,000 plus 10% of ₹50,000 = ₹55,500. GST at the rate of 3% on the ₹55,500 will be levied (Rs 1650), taking the total cost of purchase to ₹56650.
GST on digital gold
GST is not only levied on physical gold, but also in the case of digital gold. So, in case you are buying digital gold, apart from the other charges, you also need to pay GST at the rate of 3%.
GST on ETFs
If you are buying gold exchange-traded funds (ETFs) offered by mutual funds, then also you have to pay GST at the rate of 3%. However, in the case of gold ETFs, the GST is paid back to investors as the fund house takes input credit for the same.
Sovereign gold bonds
In the case of sovereign gold bonds, no GST is levied.
The price of gold tends to change daily and is influenced by several factors including – its demand and supply, import duty, currency fluctuations and norms of the Indian jewellery market. Such factors and their influence tend to impact gold GST rate on transactions significantly.
Meanwhile, there are certain things you need to consider before buying gold ornaments.
1) Go for only hallmarked, or BIS certified gold jewellery in order to be sure about its purity. Generally, 22 Karats, 18 Karat and 14 Karat gold is used to make jewellery.
2) The price of gold is based on its finesse. Low quality of gold typically comes at a relatively low per gram price and also attracts a lower GST on gold.
3) It must be noted that precious and semi-precious stones in ornaments are taxed differently under the GST regime.