Manufacture and sale of gold and gold jewellery is already an established industry in India. Reports presented by the Indians Gold Jewellery Export Promotion Council (GJEPC) further paint a positive picture.
As per GJEPC’s chairman, the present gold industry carries the potential to export two times the present valuation by 2025, with exports reaching up to $18 Billion. The sector currently employs approximately 5 million people and can expect 3 million job creations with this growth.
As the gold industry is a valuable contributor to the Indian economy, the applicability of GST on gold did not come as a surprise.
The introduction of Goods and Services Tax (GST) has resulted in a slightly higher price in making charges or selling of gold. Nevertheless, it has also brought into ambit the unorganised market for gold. It has thus largely improved transparency and safety in gold trade.
As all gold traders are mandatorily required to hold GST registration and pay tax, accounting for gold trade becomes easy.
GST on gold – Overall impact on the trade
While the implementation of this taxation led to a price rise in gold sales and making charges, it also curbed the sale of smuggled gold into the country. They are now mandatorily required to have a GSTIN for every sale made, which can be considered among the latest impacts of GST.
With the introduction of 3% GST on gold over and above the import duty of 10%, it saw a general price rise by about 0.75%. As compared to taxes levied on this expensive item, i.e. VAT and service tax of 1% each, levy of GST increased taxation by 1%, thus impacting the prices.
However, gold traders also had to become well-aware of what is GST and the process of filing returns to comply with the requirements. The overall impact thus resulted in improved transparency in the industry, requiring all gold traders to adhere to GSTIN generation and filing return.
GST return filing on time is thus necessary for gold traders, making it critical that they know how to file GST return. Proper and in-time filing of returns can also make external financing easy to avail, among other requirements. Financial institutions bring these financing options as business loans of up to Rs. 30 Lakh to help entrepreneurs meet their immediate need for business funding. Lenders like Bajaj Finserv further make these collateral-free funds affordable through attractive interest rates.
Gold traders can thus pay GST on gold and file return in time to improve their chances of loan approval and enjoy these benefits.
Merging organised and unorganised sector
Among the primary advantages of GST has been to erase the disparity between the organised and unorganised sector of gold trade. India is one of the largest importers of gold with an annual import volume close to 900 tonnes.
The share of the unorganised sector on import is somewhere between 25% and 30%. As GST implementation has raised the effective tax rates on gold import and sale in India to 13%, importers seek to have the import duty reduced to the previous rates.
Nevertheless, with applicable GST rates in India at 3%, and the provision to claim the input tax credit, is likely to bring down unauthorised imports. As a result, it can be expected that traders in the unorganised sector come to organised trade, thus improving transparency.
While the implementation of GST affects gold jewellery and has led to a price rise, it consequently leads to a much-organised market for gold in India. As a result, it can bring the much-needed boost to the country’s economy.