GST on Gold in India: Tax Rates and Rules

The GST on gold, whether it be of any purity, is currently levied at 3% of the intrinsic value of gold. The 3% GST on gold includes two components of equal share, which are 1.5% Central GST and 1.5% State GST. The GST is applicable to physical gold, whether in the form of jewellery, bars or coins, and also digital gold.

In addition to the 3% GST on gold, the government has also imposed 5% GST on the making charges of gold jewellery, which makes gold jewellery a bit more expensive than gold bars and coins. The gold traders and jewellers must register under the GST regime and comply with the GST regulations, or else they can face penalties.

The GST regime was implemented in 2017, and the rates are revised from time to time. Before the GST regime came into effect, gold was subjected to 1% Value Added Tax (VAT) and 1% Excise Tax. Therefore, the GST on gold has added cost to it compared to the earlier tax system.

Impact of GST on Gold

Gold has traditionally been used as an investment product, in addition to its ornamental value. You can invest in gold in its different shapes and forms, whether it be a gold coin, gold jewellery, digital gold, sovereign gold bonds or Gold ETFs.

Here is how different gold items and allied products are impacted by the GST.

GST on Gold Coins

Gold coins are coins that are made of gold and are used as gift or investment products with high liquidity. The GST on gold coins is 3% and no additional taxes or making charges are imposed.

GST on Gold Bars

Gold bars, also known as ingots, are made of gold and are the shape of a chocolate bar or biscuit. It is available in different sizes and weights and is usually heavier and costlier than coins. It is mainly purchased as a long-term investment product. The GST on gold bars is 3% and there are no additional taxes or making charges.

GST on Gold Jewellery

Gold jewellery is the ornaments made of gold that are prepared and designed by trained craftsmen. It can be a gold ring, a necklace, a bracelet, or a chain. The GST on gold jewellery is 3% of the intrinsic value of gold and an additional 5% on the jewellery’s making charges. The making charges vary based on the complexity of the design, jeweller’s brand, and the type of jewellery.

GST on Digital Gold

Digital gold is offered by digital gold platforms, which allow you to buy and invest in gold in an electronic form without obtaining its physical possession, and its equivalent in physical form is held safely by the platform. The GST on digital gold is 3%.

GST on Sovereign Gold Bonds

Sovereign Gold Bonds are government securities denominated in grams of gold issued by the Reserve Bank of India, on behalf of the government of India. It is an investment product for which an investor has to buy in cash and redeem in cash. There is no GST on the purchase of Sovereign Gold Bonds.

GST on Gold ETFs

A gold ETF is an investment product that invests in gold bullion, providing an opportunity to invest in stocks that track the price of gold. There is no GST on buying or selling of Gold ETF stocks.

Penalty for GST Non-Compliance

As a trader or jeweller, you are liable for the collection of GST and depositing it with the concerned government agency, the Income Tax department. The government has a strict code of penalties for non-compliance with the GST rules and regulations, and there are 21 listed offences under GST. A trader or jeweller can face a penalty for offences like selling gold without an invoice or against a false or wrong invoice, and failure to submit the collected GST within the stipulated time. Here are some offences and the penalties in case of non-compliance with GST on gold.

Offense	Penalty
Late/Delayed Filing	₹20 per day for nil returns and ₹50 per day for other scenarios, with a maximum cap of ₹10,000.
Wrong ITC Claim	100% of the wrongly claimed credit or ₹10,000, whichever is higher.
Not Registering under GST	₹10,000 or 100% of tax due, whichever is higher.
Supplying without an Invoice	Penalty equal to tax evaded or ₹10,000, whichever is higher.
Not filing GST	Penalty 10% of the tax due or ₹10,000, whichever is higher
Not issuing an invoice	100% of the tax due or ₹10,000, whichever is higher

Tips for Buying Gold

You should check the purity of gold, which is measured in karats (K). 24K (99.9% purity) is the gold of highest purity, while gold is also available in 22K (91.67% purity), 18K (75% purity), 14K (58.33% purity), and 10K (41.67% purity).
When buying jewellery, you will have to pay making charges, which vary depending on the complexity of the design and the seller’s brand value.
You should prefer buying hallmarked gold, which is a recognised certification of purity and authenticity.
Gold prices change almost on a daily basis and differ across different cities. So you should be aware of the prices in your city.

Conclusion

Gold remains one of the preferred and celebrated investment products in India. It is widely purchased and used at times of celebrations, weddings, and given as a gift to loved ones. Before buying physical gold, you must consider the applicable GST rate on gold, as it will impact the final price. The GST on gold is currently at 3%, while jewellery items will be charged an extra 5% GST on making charges. In case you want to purchase gold merely for its investment value (and not its ornamental value), you can also explore the options of Gold ETFs and Sovereign Gold Bonds, which do not attract GST on buying or selling.

FAQs

What is the GST on gold?

GST on gold in India is 3% of its intrinsic price, which includes 1.5% CGST and 1.5% SGST.

What is the GST on gold jewellery?

Though GST on gold jewellery is similar to other physical gold products, that is 3%, you will be charged an extra 5% GST on the making charges of the jewellery. The making charges vary, depending on the complexity of the design and the jeweller’s brand value.