GST Rates on Gold in India: Rules & Tax Impact Explained

What is GST on Gold?

GST is a unified tax that has replaced multiple indirect taxes in India. Before GST, gold was subject to value-added tax (VAT), excise duty, and customs duty, which varied from state to state. The introduction of GST on gold ornaments has standardized the taxation system, making it more transparent and streamlined.

Currently, the GST rate on gold is 3% of its value. Additionally, there is a 5% GST on gold-making charges, which applies when purchasing gold jewellery. Understanding these tax components is crucial for both businesses and consumers to avoid confusion and ensure compliance with the law.

Moreover, the GST on gold imports also plays a vital role in pricing. Imported gold is subject to a 12.5% basic customs duty (BCD), but the effective duty may vary based on surcharges and cess, as per the latest government regulations. Additionally, a 3% GST is applied to the assessable value. Always check the latest import tax rates before purchasing. 

These rates impact the overall cost of gold bullion, gold bars, and gold coins. Similarly, the GST on digital gold follow the same 3% GST rule, making it necessary for investors to be aware of the tax structure.

With the increase in GST compliance for jewellers, businesses must register for GST registration for gold traders to ensure smooth transactions. Additionally, some exemptions exist, such as GST exemption on gold schemes and GST rebates for exported gold jewellery.
 

Understanding GST on Different Forms of Gold Purchases

Gold is available in multiple forms, and the GST rate on gold varies based on the type of gold investment. Whether you purchase gold jewellery, gold coins, gold bars, or digital gold, understanding the GST implications on gold is crucial.

1. GST on Gold Coins and Gold Bars

• GST on gold coins and gold bars is fixed at 3%, which is the same as for gold jewellery.
• If purchased from a registered jeweller, a proper invoice is provided with a detailed GST breakdown to ensure transparency.
• Gold bullion, gold biscuits, and investment-grade gold bars also attract the same GST on gold purchases.
• Some banks and financial institutions sell gold coins with GST included, making them an easy investment option.

2. GST on Gold Making Charges

• When buying gold jewellery, an additional 5% GST on gold-making charges is levied.
• This applies to both handcrafted and machine-made gold jewellery, affecting the final price of gold ornaments.
• Making charges on gold jewellery vary based on craftsmanship, and GST is applied separately to these charges.
• If you exchange old gold for new jewellery, GST is applicable only on the making charges and not on the full value of gold.

3. GST on Digital Gold

• If you buy digital gold through apps or online platforms, a 3% GST is applied to the transaction value. However, some digital gold providers may also charge additional service or platform fees, which are separate from GST and can increase the overall cost.
• Since digital gold is backed by physical gold, it follows the same gold GST rate as physical purchases.
• Investing in digital gold with GST applied allows investors to hold gold without worrying about storage or security.

4. GST on Gold ETFs & Sovereign Gold Bonds (SGBs)

• Gold ETFs do not attract 3% GST on purchases. Instead, GST is levied only on fund management services and related charges. Investors buying and selling Gold ETFs do not pay direct GST on their transactions.
• Sovereign Gold Bonds (SGBs) are completely GST-exempt, making them a tax-efficient alternative to physical gold investments.
• SGBs offer additional benefits like fixed interest rates and capital gains tax exemption, making them one of the best gold investment options with no GST impact.

5. GST on Imported Gold

• Imported gold incurs a 12.5% basic customs duty (BCD) plus applicable surcharges and cess, which may vary. Additionally, a 3% GST applies to the assessable value. Check the latest tax rates before buying.
• This taxation increases the overall cost of imported gold bullion, gold bars, and foreign-manufactured gold coins.
• Many jewellers and businesses must register for GST compliance for gold traders when dealing with imported gold to ensure legal and tax adherence.
   

How GST is Calculated on Gold Jewellery?

Let’s take an example to understand how GST impacts the final cost of gold jewellery.

• Suppose you buy 20 grams of gold at a market rate of ₹5,000 per gram.
• The total gold value = ₹1,00,000 (₹5,000 × 20 grams)
• Making charges (assumed at ₹500 per gram) = ₹10,000 (₹500 × 20 grams)

Now, let’s apply GST,

• GST on Gold Value (3%): ₹1,00,000 × 3% = ₹3,000
• GST on Making Charges (5%): ₹10,000 × 5% = ₹500

Thus, the final price of your gold jewellery will be,
₹1,00,000 (gold price) + ₹10,000 (making charges) + ₹3,000 (GST on gold) + ₹500 (GST on making charges) = ₹1,13,500

This calculation helps consumers and businesses understand the total tax impact on gold jewellery.

Impact of GST on Gold Prices

Since the introduction of GST on gold jewellery and gold investments, prices have seen a slight increase. Here’s how GST affects gold prices,

Higher Costs for Consumers

• The GST on gold making charges has increased the price of gold jewellery, affecting consumer spending.

Increased Transparency

• The GST impact on gold trade has replaced multiple state-level taxes, creating a uniform pricing structure for gold buyers.

Encouragement for Digital Gold Investments

• Investors are shifting towards gold ETFs and Sovereign Gold Bonds (SGBs) to avoid GST on physical gold purchases.

Boost for the Organized Gold Market

• More jewellers are registering under GST, leading to a decline in black market gold transactions.

While GST on gold investment has led to minor price hikes, it has also streamlined taxation, making the industry more transparent and regulated.
 

GST Compliance for Jewellers & Gold Traders

Jewellers and gold traders must adhere to GST compliance for gold businesses to avoid penalties. Key requirements include,

• GST Registration for Jewellers: Every jeweller with an annual turnover exceeding ₹40 lakh (₹20 lakh for special category states) must register for GST.
• Filing GST Returns for Gold Business: Regular GST returns such as GSTR-1, GSTR-3B, and GSTR-9 are mandatory.
• Issuing GST-Compliant Invoices: All gold sales must include invoices with GST details for tax compliance and transparency.

Ensuring GST compliance for gold traders not only prevents legal issues but also enhances consumer trust in registered jewellers.
 

GST Exemptions and Rebates on Gold

Although most gold transactions incur GST on gold purchases, some GST exemptions on gold exist,

GST on Gold Exports

• Gold jewellery exports qualify for GST refunds, helping businesses stay competitive in global markets.

GST on Old Gold Exchange

• When exchanging old jewellery for new, GST is applied only to the making charges and not the full value of gold. 
• This applies only if the jeweller refurbishes the old gold for the same customer. If the jeweller buys old gold separately and sells new gold, GST applies to the full value of the new jewellery.

GST Exemption on Sovereign Gold Bonds (SGBs)

• SGBs do not attract GST, making them a cost effective gold investment option compared to physical gold.
• Understanding GST rebates on gold jewellery and gold schemes can help buyers and investors make informed financial decisions.

Understanding GST rebates on gold jewellery and gold schemes can help buyers and investors make informed financial decisions.

Final Thoughts

The implementation of GST on gold has transformed the taxation environment for gold buyers, gold investors, and jewellers in India. While 3% GST on gold value and 5% GST on gold making charges have slightly increased prices, the structured taxation system has improved compliance, transparency, and regulation.

For gold buyers, understanding how GST is applied to gold jewellery, gold bars, gold coins, and digital gold helps in making smarter purchasing decisions related to gold. For jewellers and gold traders, ensuring GST registration, invoicing, and tax filing is essential for a smooth business operation.

As gold remains an integral part of India's investment culture, staying updated on GST rules for gold purchases is crucial for both buyers and sellers.