Summary: The article examines the growing significance of “Old Gold Exchange” schemes in India’s gems and jewellery trade against changes in gold import tariffs, domestic gold recycling and working-capital requirements. It refers to the Union Budget 2024–25 reduction of customs duty on gold to 6 percent and to Notification No. 15/2026-Customs dated May 13, 2026, stated in the supplied content to have restored the effective import duty on bullion to 15 percent. The article explains that higher import costs can increase working-capital pressure for organised jewellers whose principal cost is raw gold, encouraging greater sourcing of secondary gold from consumers. It also discusses the role of household gold, Gold Metal Loans (GML), and the potential GST treatment of purchases from unregistered consumers and exchanges of old jewellery for new jewellery. The supplied content specifically refers to Section 9(4) of the CGST Act and Notification no. 58/2018 dated 27.09.2018 in discussing purchases from unregistered persons, and to Sections 15(3) and 15(1) of the CGST Act in discussing valuation of jewellery exchanges.
Introduction
Customers consider jewellery retail ads during Indian festivals due to their aggressiveness in combination with the launch of new collections and promotions for “Old Gold Exchange” schemes. However, this is an interesting case study of how corporate finance, value added tax, and finance working capital combine to develop the Indian jewellery market.
What customers Perceive to be Trade-In promotions are more structurally significant in the gems and jewellery trade as a response to changes in economics and pricing of inventories.
1. Macroeconomic Shifts
The best way to understand why domestic trade-ins are so attractive to retail jewellers, is to examine some revisions to India’s tariff structure:
The Baseline: In the Union Budget for 2024 – 25, The Indian government reduced effective customs duty on gold to 6 percent (5 percent basic customs duty + 1 percent AIDC). This brought relief to retail businesses and reduced the unofficial import channel.
The Tariff Shift: The Ministry of Finance, India, installed Notification No. 15/2026-Customs on May 13 2026, and restored total effective import duty on bullion to 15 percent (10 percent BCD + 5 percent AIDC). This notification was issued to control outflow of foreign currency and maintain equilibrium in foreign currency reserves.
Due to the sudden tariff revision, importing bullion became 9 percent more expensive. For retail jewellers whose primary cost of goods sold is raw gold, this tariff shift created a working capital problem.
2. Recirculation of Gold from Domestic Vaults
Private households in India have approximately 25,000 tons of gold. With foreign primary bullion being imported at a cost of 15 percent, gold from domestic households effectively serves as a primary bullion in the country.
For organized retail jewellers, old gold exchanges constitute 30-35% of their overall product range. The industry is taking measures to localize the recycling chain in order to meet demand in the wake of rising tariffs. Consumers’ domestic gold deposits have become a critical “renewable domestic resource” for the organized jeweller sector.
3. The Indirect Tax & Accounting Angle (CA Insights)
For finance professionals and tax experts, this structural shift in the supply chain dynamics has implications for working capital management, tax liabilities, and balance sheet optimization.
1. Customs duty protection & margin preservation:
Given the advent of higher tariffs on gold imports into India, organized jewellers are looking to source secondary gold directly from consumers in order to bypass the 15% customs duty regime. The ability to bypass customs duties translates into a substantial cost advantage for the jeweller on the cost of primary metal, thereby helping maintain selling prices of gold jewellery in check.
1. Working capital optimization & GML:
Organized jewellers have traditionally relied on Gold Metal Loans (GML) availed from banks to finance inventory of primary gold. Such gold metal loans, however, come at a cost to the borrower in terms of interest dues.
By shifting toward direct sourcing of raw material from exchange customers, the jeweller reduces its overall dependence on bank-funded GMLs.
This results in optimizing working capital utilization and minimizing interest costs.
1. GST treatment of old gold purchases & exchanges:
From indirect tax perspective, there are a few issues that merit consideration insofar as old gold exchanges are concerned.
Purchases from Unregistered Persons: Since a retail consumer is typically an unregistered person for GST purposes, purchase of old gold from such persons would not be subject to GST (Reverse Charge Mechanism) as per Notification no. 58/2018 dated 27.09.2018 issued by CBIC (para 6, sec 9(4) CGST Act).
Exchange of old jewellery for new: Valuation for GST purposes: In case of jewellery exchange, GST of 3% would be applicable on the value of new jewellery (making charges still attracting 5% GST), since old jewellery would be treated as non-monetary consideration under section 15(3) read with section 15(1) of the CGST Act.
