With the correction of gold prices as compared to 2019 and the marriage season on the way, India is all set to go on a spending spree for the yellow metal.
While the prices for gold is something to ponder upon, its also important to understand the GST levied on the various forms of gold.
Purchase of New Gold
In case of gold jewellery, a GST rate of 3% is applicable, charged on the total value of gold purchased as well as the making charges.
For example, if a person wants to purchase gold jewellery of INR 1,00,000 and the making charges are at the rate of 20%, then the total cost of making charges will be INR 20,000. This will render the total cost of making the gold jewellery INR 1,20,000 and on such cost GST at the rate of 3% shall be levied, taking the total cost of purchase to INR 1,23,600.
Re-Designing of Pre-Owned Gold
While the purchase of new jewellery attracts 3% of GST rate on the entire amount of purchase value, the re-designing of pre-owned gold attracts GST of 18% only on the service charges i.e the making charges of the jewellery.
The purchase of digital gold also attracts GST at the rate of 3% similar to the purchase of physical gold. Such 3% GST is applicable on the total value of investment and other charges paid on the same.
Gold Exchange Traded Funds
The same is the case with gold exchange-traded funds (ETFs) offered by mutual funds. While the investments are backed with physical gold, in case of gold ETFs, the effect of GST is not passed on to investors as the fund house takes input credit for the same.
Sovereign Gold Bonds
In case of sovereign gold bonds, as there is no element of purchase of physical gold, no GST is levied on such purchase.
WRITTEN BY: CA ANKIT GUPTA