Gold is quite a popular purchase both from consumption and investment perspective. But do you know what is the GST in Gold – How much tax you pay while buying or investing in Gold? The post tells you different situations and how Gold is taxed.
GST on Gold when buying New Gold Jewellery
Government levies 3% GST on Gold in case you buy a new gold Jewellery, coins or in any other physical form. This levy is on both – cost of the gold and the associated making charges. Here is an example:
If you buy a gold jewellery having weight of 10 grams and making charges of 10%, here is how the calculation of GST would work out:
- Cost of Gold (assuming Rs 40,00 per gram) = Rs 40,000
- Making charges @ 10% of Gold Cost = Rs 4,000
- GST Charged = Rs 1,320 (3% of Rs 44,000)
- Total cost of Purchase (including GST) = 40,000 + 4,000 + 1,320 = Rs 45,320
GST on Redesigning Gold Jewellery
In case you give your jewellery for redesigning then the GST on the making charges is 18%. There is no GST on the gold as the gold has been given by you. If we take the same example as above where you have given a 10 gram jewellery for redesigning, the GST would be 18% of Rs 4,000 = Rs 720.
Total cost of redesigning (including GST) = Rs 4,000 + 720 = Rs 4,720
GST on Gold when Investing
You can invest gold in physical form (like coins, bars, etc) or digital form (like ETFs, Mutual Funds or Sovereign Gold Bonds). The GST varies on each mode of investment.
Should you Invest in Gold?
We looked at more than 55 years history of gold to see if its a good idea to invest in Gold. We concluded that its more volatile than perceived but investing in long term may provide you with more stable returns. You can look at the complete analysis and our conclusion here – Looking at Gold Price History in India – Should you Invest in Gold?
GST on Gold – Investment in Physical Form
If you buy gold for investment in Physical Form like coins or bars, its similar to buying gold in form of jewellery. The GST would be levied at the rate of 3% on the value of gold and making charges. So for investing in 10 grams gold, which would cost Rs 40,000 – with making charges and GST it becomes Rs 45,320. So an extra Rs 5,320 which is more than 13%. This is one reason investing in Physical gold is a bad idea.
GST on Gold Investment in ETFs & Mutual Funds
When you buy Gold ETFs or Gold Funds of Funds the mutual funds have to back up the investment by buying so much gold in physical form. They too are levied GST of 3%. However, as GST can be used as input credit, most of this GST cost is set off by Mutual Funds and the GST paid on gold comes back to the investors. So practically there is no additional GST cost to investors.
GST on Gold Investment in Sovereign Gold Bonds
There is no physical buying of gold in case of Sovereign Gold Bonds – so there is no question of GST here.
Know about the latest issues of Sovereign Gold Bonds
Sovereign Gold Bonds are one of the better ways to invest in gold. It’s safe, backed by government of India and you need not be worried about purity of gold or storage. The icing on the cake is you get interest paid on your investment. You can buy these Sovereign Gold Bonds from NSE/BSE but the liquidity is a problem. So it’s a good idea to subscribe to latest issue of Sovereign Gold Bonds which comes almost every month.
How does GST on Gold impact you?
As you can see GST on Gold adds an extra 3% to the cost when you buy gold in physical form. However there is no impact of GST if you invest in digital form. This is one reason why you should prefer Digital Gold over Physical. Gold is not the only investment which is impacted by GST. We have to pay GST on insurance premiums, the expenses in Mutual Funds and so on. But GST impacts insurance and gold more than it does to other investments