How to Calculate GST on Gold and Gold Jewellery in India?

Gold has long been cherished in India, not only as a precious metal but also as a symbol of wealth, prosperity, and financial security. Whether for investment, weddings, or festive occasions, Indians purchase gold in large quantities every year. However, with the implementation of the Goods and Services Tax (GST) in July 2017, the gold and jewellery sector underwent significant changes. Understanding how GST on gold works and how to calculate it accurately is essential for buyers, sellers, and jewellers alike.

This blog will walk you through everything you need to know about GST on gold, including current tax rates, calculation methods, and the role of GST registration for jewellers and traders.

Understanding GST on Gold: A Brief Overview

Before the GST regime, the purchase of gold in India attracted several different taxes:

• Excise Duty (1%)

• VAT (1-1.2% depending on the state)

• Customs Duty (on imported gold)

When GST was implemented, these multiple tax layers were replaced by a unified structure, simplifying the taxation process. However, the price of gold jewellery for end consumers changed slightly due to this new tax model.

What is the GST Rate on Gold?

The GST rate on gold and gold jewellery in India is composed of multiple components:

Item	GST Rate
Gold (in raw form or bars)	3%
Making charges (on jewellery)	5%
Gold imports (Customs Duty + IGST)	10.75% (Customs) + 3% (IGST)

Let’s break it down:

1. GST on Gold Value: A flat 3% GST is applicable on the value of physical gold.

2. GST on Making Charges: An additional 5% GST is levied on the making charges of gold jewellery, which are often labor or design costs.

3. Import Duty: When gold is imported, a customs duty of 10.75% is applied along with a 3% IGST.

   
   

Why GST Registration is Important for Jewellers

If you are a jeweller or gold trader with an annual turnover exceeding ₹40 lakhs (₹20 lakhs for special category states), GST registration is mandatory. Once registered, you are required to:

• Charge GST on your gold and jewellery sales

• File regular GST returns

• Maintain proper records of sales and purchases

• Claim Input Tax Credit (ITC) on inputs used for your business (excluding gold purchases for trading)

Without GST registration, you cannot legally collect GST from customers or claim ITC, which can impact your profit margins and compliance.

How to Calculate GST on Gold Jewellery: Step-by-Step

Let’s consider a practical example to understand how GST is calculated when you buy gold jewellery.

Example:

You purchase a gold necklace weighing 20 grams.

• Current Gold Rate (as per market): ₹6,000 per gram

• Making Charges: ₹1,000 per gram

Step 1: Calculate the Price of Gold

20 grams × ₹6,000 = ₹1,20,000

Step 2: Calculate Making Charges

20 grams × ₹1,000 = ₹20,000

Step 3: Apply 3% GST on Gold Value

3% of ₹1,20,000 = ₹3,600

Step 4: Apply 5% GST on Making Charges

5% of ₹20,000 = ₹1,000

Step 5: Total Cost

• Gold Value = ₹1,20,000

• Making Charges = ₹20,000

• GST on Gold = ₹3,600

• GST on Making = ₹1,000

Final Amount Payable = ₹1,20,000 + ₹20,000 + ₹3,600 + ₹1,000 = ₹1,44,600

So, the total amount payable for the gold necklace would be ₹1,44,600.

GST on Imported Gold

India is one of the largest importers of gold in the world. Imported gold attracts:

• Basic Customs Duty (BCD): 10.75%

• Agriculture Infrastructure and Development Cess (AIDC): 2.5%

• IGST: 3%

Although customs and cess are not part of the GST framework, they impact the landed cost of gold, thereby affecting the final retail price. The IGST of 3% is added on top of the customs value (cost + BCD + AIDC).

Note: Businesses with GST registration can claim the 3% IGST as Input Tax Credit.

Input Tax Credit (ITC) for Jewellers

One of the major advantages of GST for businesses is the Input Tax Credit (ITC) mechanism. However, there are limitations in the context of gold.

Jewellers can claim ITC on:

• GST paid on making charges (5%)

• GST paid on other business inputs like tools, packaging, rent, electricity (if registered)

But ITC is not allowed on gold purchased for resale, as per Section 17(5) of the CGST Act, since gold is considered a blocked credit in certain resale scenarios.

Hence, while GST registration enables access to ITC, jewellers must maintain proper documentation to avoid penalties or denial of credit.

Exemptions and Special Considerations

1. Unregistered Dealers:

If a consumer buys gold from an unregistered dealer, GST may not be explicitly charged, but the dealer is violating GST laws if turnover exceeds limits. Buyers are advised to purchase only from GST-registered jewellers.

2. Old Gold Exchange:

When customers sell or exchange old gold, GST is not applicable. But if the exchanged gold is used to make new jewellery, GST applies only on the value added (making charges + extra gold, if any).

3. Hallmarked vs. Non-Hallmarked:

GST does not differentiate between BIS-hallmarked and non-hallmarked gold. However, hallmarked gold is preferred for authenticity and standardization.

How to Register for GST as a Jeweller

For jewellers or gold traders looking to register under GST, here is a simple step-by-step guide:

Step 1: Visit the GST Portal

Go to the official GST portal https://www.gst.gov.in

Step 2: Fill in the Application

Provide your PAN, mobile number, and email address. You’ll receive an OTP for verification.

Step 3: Submit Business Details

Include:

• Business name

• Address proof

• Bank account details

• Photographs

• Identity proof of promoters

Step 4: Upload Required Documents

These include:

• PAN Card

• Aadhaar Card

• Proof of business registration

• Rent/ownership proof of premises

• Bank account proof

Step 5: Verification and GSTIN Allotment

Once documents are verified, a unique GST Identification Number (GSTIN) is issued.

Jewellers must then start filing monthly and annual GST returns as per compliance.

Penalties for Non-Compliance

Jewellers or gold traders who fail to register under GST or avoid charging GST are subject to:

• Penalties up to 100% of the tax amount

• Interest on delayed payment

• Cancellation of business license

Maintaining transparency and following GST registration and filing requirements is not only a legal obligation but also builds trust with customers.

Conclusion

The introduction of GST has brought transparency and uniformity to the gold industry in India. Whether you are a consumer, trader, or manufacturer, understanding the application of GST on gold is crucial for financial planning and compliance. If you are in the business of selling or manufacturing gold jewellery, obtaining GST registration is mandatory for lawful operations and to claim applicable Input Tax Credit.

Always ask for a GST invoice when buying gold jewellery and ensure that you are dealing with registered jewellers to avoid future disputes. For business owners, timely GST filing, accurate invoicing, and proper record-keeping are essential to avoid penalties and ensure smooth operations

Need Help with GST Registration or GST Filing for Your Jewellery Business?

 Contact Online Legal India for expert assistance in hassle-free GST registration, return filing, and legal compliance tailored to the gold and jewellery sector.