BASIC UNDERSTANDING OF GST ON JEWELLERY BUSINESS

The Indian jewelry industry has been greatly influenced by the Goods and Services Tax (GST). The rates are now dependent on the kind of jewelry and material used post the Union Budget. Different prices apply, depending on the type of jewelry be it gold, silver, diamond, or gemstone. Let us have a brief understanding of GST on Jewellery Business.

WHAT IS GST ON GOLD JEWELLRY?

Gold, Silver, Diamond, and gemstones attracts a basic rate of 3% GST. However they are differentiated in rates according to their current form of Jewellery as they could be either graded or ungraded or under some manufacturing process. The below table specifies the GST rates applicable on different forms of Jewellery.

GST RATE ON MAKING CHARGES

Apart from the above basic GST payable, the consumer is required to pay GST on the making charges of the Jewelry as well. The current rate has been brought down from 18% which was applicable at the time of implementation of GST in 2017. The current rate is:

• 5% GST on making charges of gold and diamond jewellery
• 18% GST on making charges of silver jewellery.

GST ON OLD GOLD JEWELERY

Exemption has been granted to exchange and sale of old gold jewellery therefore, no GST is applicable for exchanging old gold jewelry for new gold jewelry and sale of old gold jewellery.

GST ON DIGITAL GOLD PURCHASE

In recent times, the market has seen investment in gold through digital platforms. They attract the same rate of GST i.e. 3%. However, this is not the only charge applicable to digital gold investment in India. Other charges that may be applicable and vary from one investment platform to another include transaction costs, trustee fees, maintenance charges, storage charges, processing fees, etc. and each of these charges features a 3% GST rate similar to physical gold. They are typically covered by the spread i.e. difference between the buying and selling price of digital gold on the platform.

BASIC CALCULATION FOR GST ON GOLD

COMPLIANCE REQUIREMENT

• Registration: According to the provisions of GST Act, registration limit for jewellery is Rs. 40 lakh e., every jeweller who has a turnover of Rs. 40 lakh or more is required to get themselves registered and thereby comply with the rules and regulations applicable.
• Input Tax Credit: Input Tax Credit can be claimed by the businessmen on inputs and raw materials used by them in the manufacturing of jewellery.
• Record Keeping: Every business who comes within the ambit of registration requirement is required to maintain transactions like purchases, sales and expenses, in short detailed record of all transactions.
• Filing of Returns: In accordance with the provisions,, the jewellers have to quarterly or half yearly of even yearly file the returns within the due date.

IMPACT OF GST ON JEWELLERY BUSINESS

• Transparency: Jewellers must adhere to all Act rules and regulations and keep records of all business transactions under the Goods and Services Tax Act. Falling to do would attract penalties resulting in injuring the reputation of their business.
• Increase in price: Separate GST payable on the piece of jewellery and making charges has made it expensive for the general public to buy jewellery.
• Compliances: Changing GST rates and compliances with every Financial Budget in each category often bewilder the payers making it difficult for them to comply with all the rules and regulations.
• Increased Paperwork: With the introduction of new tax system jewellers had to comply with new regulations, claim input tax credit, file returns which led to increased paperwork and administrative costs.

CONCLUSION

Therefore, where Jewellery Business contributes to around 7% of Gross Domestic Product (GDP) to the Indian Economy, it has to be dealt with at most caution as it attracts various taxation regimes throughout its production cycle. Therefore, we as consumers should be well updated with the changing rates. In order to stay updated and queries, feel free to contact us.