Introduction:
Goods and Services Tax (GST) is an indirect tax that is levied on the supply of goods and services in India. It is a comprehensive tax that has replaced several indirect taxes such as excise duty, service tax, and value-added tax (VAT). The implementation of GST has had a significant impact on the gold industry in India. In this blog, we will discuss GST on gold and its impact on the industry.
GST on Gold:
Before the implementation of GST, there were various taxes applicable to gold in India, such as excise duty, VAT, and customs duty. However, with the implementation of GST, all these taxes were replaced with a single tax. The GST on gold is currently set at 3%, which is applicable to both the purchase and sale of gold.
Impact of GST on the Gold Industry:
The implementation of GST has had a significant impact on the gold industry in India. Let’s discuss some of the major impacts.
- Increase in the cost of gold:
The implementation of GST has resulted in an increase in the cost of gold. Earlier, taxes such as excise duty and VAT were applicable to gold, which were lower than the current GST rate of 3%. As a result, the cost of gold has gone up, and customers have to pay more for purchasing gold.
- Impact on small jewellers:
Small jewellers have been adversely affected by the implementation of GST. They now have to register under GST and comply with the various rules and regulations. This has resulted in increased compliance costs for small jewellers, which has impacted their profitability.
- Increase in organised players:
The implementation of GST has resulted in an increase in organised players in the gold industry. Earlier, small jewellers used to dominate the market. However, with the implementation of GST, organised players have entered the market, and they are better equipped to comply with the various rules and regulations. As a result, they have gained market share, and small jewellers are finding it difficult to compete.
- Boost to the organised gold loan industry:
The implementation of GST has also given a boost to the organised gold loan industry. Organised gold loan providers such as Muthoot Finance and Manappuram Finance have gained market share, as they are better equipped to comply with the various rules and regulations. As a result, they have been able to offer more competitive rates to customers.
Pros and Cons of GST on Gold:
Like any tax policy, GST on gold has its own set of advantages and disadvantages. Here are some of the pros and cons:
Pros:
- Simplification of Tax Structure: With the implementation of GST, the tax structure on gold has been simplified, and multiple taxes have been replaced by a single tax. This has made it easier for customers to understand the tax implications of purchasing gold.
- Reduction in Tax Evasion: GST has a robust system of input tax credit that prevents tax evasion. This has resulted in a reduction in tax evasion in the gold industry.
- Boost to the Economy: GST has resulted in an increase in organised players in the gold industry, which has led to more formalisation of the economy. This has resulted in a boost to the economy, as more taxes are being collected.
Cons:
- Increase in Cost: As mentioned earlier, the implementation of GST has resulted in an increase in the cost of gold. This has made it more expensive for customers to purchase gold.
- Compliance Costs: Small jewellers have been adversely affected by the implementation of GST, as they have to comply with various rules and regulations. This has resulted in increased compliance costs, which has impacted their profitability.
- Impact on Unorganised Players: The implementation of GST has had a negative impact on unorganised players in the gold industry. They find it difficult to comply with the various rules and regulations, which has resulted in a decline in their market share.
Impact of GST Rate Changes:
The GST Council has the power to change the GST rate on gold. Any change in the rate can have a significant impact on the gold industry. For example, if the GST rate on gold is reduced, it could lead to an increase in demand for gold, as it would become more affordable for customers. On the other hand, if the GST rate is increased, it could lead to a decrease in demand for gold, as it would become more expensive for customers.
Impact on Gold Imports:
GST has also impacted the import of gold in India. Gold imports are subject to customs duty, which is still applicable after the implementation of GST. However, the customs duty rate on gold was reduced from 10% to 7.5% in 2019. This has resulted in a decrease in the cost of imported gold, which has had a positive impact on the industry.
Impact on Gold Jewellery Export:
GST has also impacted the export of gold jewellery from India. Earlier, gold jewellery exports were zero-rated, which meant that there was no tax applicable on exports. However, after the implementation of GST, a tax refund scheme was introduced for exports of gold jewellery. This has resulted in increased compliance costs for exporters, as they have to comply with the various rules and regulations
Conclusion:
In conclusion, the implementation of GST has had a significant impact on the gold industry in India. The GST on gold is currently set at 3%, which has resulted in an increase in the cost of gold. The implementation of GST has also impacted small jewellers, and it has resulted in an increase in organised players in the gold industry. The organised gold loan industry has also benefited from the implementation of GST. It remains to be seen how the gold industry will evolve in the future in the light of the implementation of GST.
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Frequently Asked Questions (FAQ’s)
Q1.) What is the current GST rate on gold in India?
The current GST rate on gold in India is 3%.
Q2.) When was GST implemented on gold in India?
GST was implemented on gold in India on July 1, 2017.
Q3.) Is GST applicable to all types of gold jewellery?
Yes, GST is applicable to all types of gold jewellery, including handmade and machine-made jewellery.
Q4.) Are there any exemptions on GST for gold purchases?
No, there are no exemptions on GST for gold purchases. All gold purchases are subject to GST.
Q5.) Can I claim input tax credit on gold purchases?
Yes, you can claim input tax credit on gold purchases if you are a registered taxpayer and use the gold for business purposes.
Q6.) How has GST impacted the cost of gold in India?
The implementation of GST has resulted in an increase in the cost of gold in India due to the 3% tax rate.
Q7.) Has GST impacted the gold industry in India?
Yes, the implementation of GST has had a significant impact on the gold industry in India, resulting in the formalisation of the industry and a reduction in tax evasion.
Q8.) How has GST impacted small jewellers in India?
Small jewellers have been adversely affected by the implementation of GST due to the increased compliance costs, which has impacted their profitability.
Q9.) Can the GST rate on gold be changed in the future?
Yes, the GST rate on gold can be changed in the future by the GST Council.
Q10.) Does the customs duty on gold imports in India also apply after the implementation of GST?
Yes, the customs duty on gold imports in India still applies after the implementation of GST.
