Goods and Services Tax (GST) has culminated multiple taxes into one. Implementation of GST has shown the effect on almost all the goods and services. While it might be positive on some products, it has even been negative on some other. In this article, we are going to see how GST has impacted on Gold and the making charges of Gold Jewellery.
Impact of GST on Gold:
As soon as GST was implemented, the Gold prices have soared to a two month high at once. The Physical demand for Gold has not increased much during this period. But, the GST of 3% on Gold had a cascading effect on the Prices of Gold and Gold ornaments. Earlier, the taxes related to Gold were 1% Service Tax and 1% Value Added Tax (VAT). Total it was 2%. However, after GST, the tax on the Gold items is 3%. So, Gold has become around 1% costlier due to increase in tax.
Impact of GST on Gold Import:
The media has shown coverage that the Gold traders have made the best use of GST in the months of July and August wherein they have imported 25 tonnes of Gold from South Korea. India had a free trade agreement with South Korea recently and the Gold traders took advantage of it by importing Gold in large quantities. The traders were not required to pay the import duty of which is 10%.
Impact of GST on Organised Gold Sector:
The implementation of GST will have an impact on the Organised sector for sure. Only 30% of the Gold trade is organized one in India. GST is supposed to benefit the organized Gold trade. There will be more transparency and accountability with GST. But, Implementation of GST on Gold might influence the gold traders from moving to unorganized areas. It would benefit the traders if they purchase smuggled Gold and sell without bills.
Impact of GST on Unorganised Sector:
It is said that around 700 to 800 tonnes of Gold are annually imported to India mostly from Dubai. 30% of it is said to be smuggled Gold and comes under unorganized sector. GST has increased the tax on Gold to 13% which makes it more costly. So, there are chances of increase in smuggling the Gold from other countries compared to earlier. Several Gold Merchant Associations have appealed to the GST council to decrease the import duty to 6%. GST framework further demands that every transaction is reported to receive input credit. The unorganized market may not be willing to reveal all of their transactions. So, it would affect them.
Impact of GST on Gold Making Charges:
The making charges on Gold Ornaments is fixed at 5%. Earlier, it was fixed at 18%. However, on the request of various Gold merchant associations in India, GST council has fixed it at 5% at the time of implementation of GST.
Making charges has been fixed at 5%, which was welcomed by the Gold merchant associations in India. At Present, the import duty on Gold is 10%, apart from 3% GST and 5% making charges. The import duty was same even before the GST and has no impact. However, the other taxes were around 2% earlier, but GST made it 3%. So, customers will have an impact of 1% increase in prices.