GST Effect on Gold Jewellery

Indians and specifically women of India are very much found of gold jewellery. After the implementation of Goods and Service Tax on 1^st July, 2017, the price of gold has seen some fluctuations due to the additional tax burden.

Under the earlier tax regime 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.

Under present article GST rates on gold jewellery, GST on gold making charges and reverse charge mechanism on old gold jewellery purchased by the jeweller is being highlighted.

GST RATES ON GOLD JEWELLERY

Gold jewellery is classified under chapter 71 and GST is payable @3% on gold and @5% on jewellery making charges.

GST ON GOLD MAKING CHARGES –

In the case of jewellery, two charges are involved 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.

The above confusion was answered by CBIC in FAQ. As per the said answer, 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.

REVERSE CHARGE MECHANISM APPLICABILITY ON OLD GOLD JEWELLERY –

There had been a lot of confusion regarding the applicability of the reverse charge mechanism in case the jeweller purchases old gold jewellery from the customer. The said position has been clarified by the board vide press release dated 13^th July, 2017.

Section 7 of the Central Goods and Service Tax Act, 2017 provides the scope of supply and as per the said section, the expression ‘supply’ includes all forms of supply made for a consideration by a person in the course or furtherance of business. 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 provided for the same is 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 and hence it will not attract any provisions of GST and hence no tax is payable on a reverse charge basis.

However, it must be noted here 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.