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GST on jewellery

upasana gupta 
on 17 August 2017

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GST on Gold Purchase

The tax slabs were announced on June 3rd, 2017 and gold will be taxed at a rate of 3%. In other words, all gold and gold-related jewellery would be taxed at a flat rate of 3%, which would be borne by the end consumer.

GST on Gold Making

In addition to this, the government has also levied a 5% tax on making charges. At present, there is no tax on making charges, which account for close to 12% of the actual cost of the gold.

The tax on making charges was initially fixed at 18%, but appeals from Indian jewellery councils and bodies to reduce the rate resulted in the government fixing it at the present 5%.

A higher tax on making charges would have increased the burden on consumers, since the added cost would have been passed on to them. The initial rate of 18% would have also resulted in consumers having to pay close to 4% as tax.

Jewellery bodies and councils have lauded the change in rate and are confident that it will result in greater transparency in the gold manufacturing market.

GST Rate & HSN Code for Precious Stones are covered under Chapter 71

GST Rates & HSN Codes on Precious Stones - Diamond, Pearls, Gold, Platinum & Jewellery


HSN Code

;

Rate (%)

7101

Pearls, natural or cultured, whether or not worked or graded but not strung, mounted or set; pearls, natural or cultured, temporarily strung for convenience of transport

3

7102

Diamonds, non-industrial unworked or simply sawn, cleaved or bruted

0.25

7102

Diamonds, whether or not worked, but not mounted or set [other than Non-Industrial Unworked or simply sawn, cleaved or bruted]

3

7103

Precious stones (other than diamonds) and semi-precious stones, unworked or simply sawn or roughly shaped

0.25

7103

Precious stones (other than diamonds) and semi-precious stones, whether or not worked or graded but not strung, mounted or set; ungraded precious stones (other than diamonds) and semi-precious stones, temporarily strung for convenience of transport [other than Unworked or simply sawn or roughly shaped]

3

7104

Synthetic or reconstructed precious or semi-precious stones, unworked or simply sawn or roughly shaped

0.25

7104

Synthetic or reconstructed precious or semi-precious stones, whether or not worked or graded but not strung, mounted or set; ungraded synthetic or reconstructed precious or semi-precious stones, temporarily strung for convenience of transport [other than Unworked or simply sawn or roughly shaped]

3

7105

Dust and powder of natural or synthetic precious or semi-precious stones

3

7106

Silver (including silver plated with gold or platinum), unwrought or in semi-manufactured forms, or in powder form

3

7107

Base metals clad with silver, not further worked than semi-manufactured

3

7108

Gold (including gold plated with platinum) unwrought or in semi-manufactured forms, or in powder form

3

7109

Base metals or silver, clad with gold, not further worked than semi-manufactured

3

7110

Platinum, unwrought or in semi-manufactured forms, or in powder form

3

7111

Base metals, silver or gold, clad with platinum, not further worked than semi-manufactured

3

7112

Waste and scrap of precious metal or of metal clad with precious metal; other waste and scrap containing precious metal or precious metal compounds, of a kind used principally for the recovery of precious metal.

3

7113

Articles of jewellery and parts thereof, of precious metal or of metal clad with precious metal

3

7114

Articles of goldsmiths’ or silversmiths’ wares and parts thereof, of precious metal or of metal clad with precious metal

3

7115

Other articles of precious metal or of metal clad with precious metal

3

7116

Articles of natural or cultured pearls, precious or semi-precious stones (natural, synthetic or reconstructed)

3

7117

Imitation jewellery

3


What will be the GST on Gold and Gold Jewellery?

Ans- GST rate on gold jewellery is 3%. However, jewellers have to pay 5% on making charges on making jewellery but will be able to recover only 3%. Input credit of 2% will be available as refund, on making charges, if any.

Is 'Karigar' required to take GST number?

Ans- Yes, if his income from making his jewellery exceeds from Rs.20 Lacs per annum than he must obtain GST number.

If a registered jeweller gets his job work done from outside 'Karigar' than how GST will be applicable?

Ans- If a 'Karigar' is also registered under GST than he will recover GST on making charges from jeweller. But if 'Karigar' is not registered than jewellers will have to pay tax on making charges paid to 'Karigar'.

If the jeweller has its own manufacturing unit how GST will be applicable?

Ans- To run a manufacturing unit one is already paying GST for power bills, telephone bills, purchase of goods, rent, consultancy fees, etc.

How the GST will be applied on repairing of jewellery?

Ans- GST will be applied on repairing charges only. However, if some gold is added while repairing goods, GST is used to be paid on additional gold used for repairing.

A customer wants to exchange a coin/bullion into ornaments how GST will be applied?

Ans- Since the customer is exchanging one product to the other; GST will be levied on full value of the product. If customer is unregistered, than jeweller will also have to pay GST on bullion received from customer apart from payment of GST on full value of product exchanged.

How will GST apply if a customer wants to convert a chain to a mangalsutra?

Ans- Since original product is getting converted to different product, GST will be levied on full value of mangalsutra. However, if it is termed as repairs only than GST will be payable on additional gold value and labour charges.

Will sale of old jewellery to trader attract GST?

sale of old jewellery to a trader cannot be taxed as it is not a transaction made in the course of running a business. Also, since sale of old jewellery is not the business of the seller, the transaction cannot be taken as a taxable supply of the item. However, if an unregistered supplier of gold ornaments sells it to registered supplier, reverse charge will apply.

Is it necessary to write making charges separately while raising invoice to the customers?

Ans- If the international standards are to be adopted making charges and wastage must be written separately while rising invoice to the customer. However, government has stated that jewellery will be taxed at 3% and hence there is no need to write making charges separately. However, we are seeking clarity on these issue from government.

Is it necessary to prepare voucher etc. while issuing goods to 'Karigar'?

Ans- Yes, otherwise goods can be confiscated.

Sometimes, one 'karigar' directly send goods to another 'Karigar' in that case is it necessary to prepare voucher etc.?

Ans- Yes, otherwise goods can be confiscated.

My man takes 20kg. Goods to different states of which he brings back some goods and he sales some goods, how SGT will be levied?

Ans- GST will be levied on all goods which are sold, but he cannot take goods to other states where you don’t have office and where you have not applied for casual taxable number in that state.

I have one shop/office in Mumbai and another shop/office in Surat how GST will be levied?

Ans- While transferring goods from one office to another which is in different state GST will be levied. However, input credit for be same will be available.

If the goods are transferred for exhibition to a different state how GST will be levied?

Ans- GST is always levied on supply but when the goods are taken to the exhibition there is no supply hence, GST shouldn’t be levied but clarifications from government are required. Current law says that GST will be applicable for movement of goods from one state to another for trade fairs and exhibition.

What precautions are required under GST?

Ans- The violation of GST is subject to penalties and precaution hence it is important that GST is followed rigorously.

Can a businessman sent goods on approval to customer?

Ans - Yes, a businessman can send goods on approval for a six months period and tax is required to be paid only when goods are approved by the customer.

Will businessman be required to declare stock as on 30th June 2017 if GST is implemented from 1st July 2017?

Ans - Yes, stock is to be declared, within 90 days.

Should job worker himself compulsorily registered under GST?

Ans- Yes, he must get himself registered because if he is not registered tax is to be paid by the jeweller for all job work done by job worker.

Will VAT credit on old stock will be available?

Ans- Yes, but old stock should not be more than one year old. Also the old stock must be sold within 6 months to avail VAT credit of old stock.

Will excise credit on old stock will be available?

Ans- In my opinion if excise paid is 1%, than excise credit will not be available.

What is reverse charge mechanism?

Ans- When you purchase goods, or make jewellery or spend any expenditure through unregistered dealer, a registered jeweller is required to pay GST on reverse mechanism.

What is E-way bill?

Ans - When the goods are transferred from one place to other, form one office to other, E- way bill must be prepared. The responsibility of preparing E- way bill will be of a person who is transferring the goods. E-way must be prepared on GST portal where in EBM number will be allotted. If goods are found to be moving without E-way bill same can be confiscated.

Is E-way bill required to be paid by a job worker while sending goods to jeweller?

Ans- Yes, E-way bill must be prepared.

Is E- way bill required to be made while transferring goods for hallmarking or sending goods to job worker?

Ans- Yes, E-way bill must be prepared.

Impact of GST on gold prices?

Gold prices dropped by 2.41 per cent since GST was rolled out as the rupee firmed up against the dollar bringing down its landed cost. The price difference between pre-GST and post-GST has narrowed down to Rs 200 per 10 gm due to a drop in the price of gold.   

Example

Purchases


Prices

GST rate

GST

Bullion

300000

3%

9000

Labour

10000

5%

500

Other bills

1000

18%

180

Total

311000

9680


Sales


Prices

GST Rate

GST

Jewellery

450000

3%

13500

Total

450000

13500


GST to pay to government: Rs. Sales - 13500 (-) Purchase - 9680 Pay Government - 3820


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