Purchasing gold without paying GST is illegal in India. GST is a mandatory tax, and evading it is considered tax fraud. However, there are some exceptions where GST is not applicable. For instance, if gold is bought from another country and imported legally, different customs duties might apply instead of GST. Additionally, if gold is purchased as an investment from certain financial institutions or government schemes, different tax regulations may apply. It is crucial to understand that deliberately avoiding GST on gold purchases can lead to severe penalties and legal consequences. Therefore, buyers should always ensure that they comply with GST regulations to avoid any legal issues.
Benefits of buying gold with and without GST
Buying gold with GST ensures legal compliance and transparency. It provides buyers with a sense of security, knowing that their purchase is legitimate and recorded. This compliance can be beneficial if the gold needs to be sold or used as collateral for loans in the future. Conversely, purchasing gold without GST may seem cheaper initially, but it carries significant risks, including legal repercussions and difficulties in reselling or using the gold for financial purposes. Without proper documentation, proving the authenticity and ownership of the gold can be challenging. Hence, while avoiding GST might save some money upfront, the long-term benefits of paying GST outweigh the immediate savings.
Table of GST rates on gold
| Type of Gold Purchase | GST Rate |
| Gold jewellery | 3% |
| Making charges on jewellery | 5% |
| Gold coins and bars | 3% |
| Gold imports | Custom Duties (Varies) |
GST rates on gold were introduced to standardise the taxation on gold purchases and ensure a uniform tax regime across the country. The primary rate for gold jewellery is 3%, with an additional 5% on making charges. Gold coins and bars also attract a 3% GST. Import duties vary depending on the source and value of the gold.
Comparison of gold prices before and after GST
The introduction of GST in 2017 altered the landscape of gold pricing in India. Below is a comparison of gold prices before and after the implementation of GST:
| Period | Gold Price per 10 grams (INR) | Tax Structure |
| Before GST (2016) | 28,000 | VAT (1-1.2%), Excise Duty (1%), Service Tax (15%) |
| After GST (2023) | 56,000 | GST on Gold (3%), GST on Making Charges (5%) |
The shift to GST simplified the tax structure by combining multiple taxes into a single 3% GST on gold and 5% on making charges. While this increased the upfront cost slightly, it brought transparency and uniformity to the market.
Conditions for GST exemption on gold purchases
Certain conditions can make gold purchases exempt from GST. These include gold bought from sovereign sources or through specific government schemes that may offer tax exemptions. Additionally, gold imported directly through legal channels might be subject to different customs duties instead of GST. Investors participating in certain financial instruments, like gold bonds issued by the government, may also enjoy GST exemptions. It is essential to consult with a tax advisor or legal expert to understand the specific conditions under which GST exemption might apply to ensure compliance with Indian tax laws.
How much gold is GST-free in India?
In India, the concept of GST-free gold is not applicable under normal circumstances. All gold purchases, whether jewellery, coins, or bars, attract a 3% GST on the value of gold and 5% on making charges. However, exceptions exist for gold acquired through government schemes or sovereign gold bonds, which might be exempt from GST. Additionally, personal gold brought into the country by returning non-resident Indians within permissible limits may not attract GST but could be subject to other customs duties. It's crucial to be aware of these specific scenarios to understand the GST implications on gold transactions fully.
How does GST on gold affect gold loans?
The implementation of GST has indirectly affected gold loans in India. Since GST increases the overall cost of purchasing gold, the principal value of gold used as collateral for gold loans has also risen. This can affect the loan-to-value (LTV) ratio, as lenders might reassess the gold’s value considering the inclusive GST amount. Consequently, borrowers may secure higher loan amounts against their gold. However, the
gold loan rate of interest remains unaffected by GST. Borrowers should ensure that the value of their gold, inclusive of GST, is accurately appraised to maximise their loan potential. Understanding these dynamics can help borrowers make informed decisions when opting for
gold loans.
