It is a known fact that implementing the Goods and Service Tax impacted the price of gold a lot. Gold became 0.75% more expensive than it was before. Before implementing the Goods and Service Tax, a person needed to pay only 1% as value-added tax along with 1% as Service Tax. So as a whole, the person needed to pay 2% extra over the selling price of any gold jewelry items. But with the Goods and Service Tax coming into the scenario, the tax rate of purchasing gold has become 3%. Hence the purchase became quite expensive.
Impact of GST on imports
With the implementation of GST on gold, the rate increased to 3%. Along with that, an addition of 10% import duty also got levied. Due to this reason, the import rates of gold also increased. Therefore, it is the best time if you plan to purchase imported gold. But one should not plan to trade in gold at this price as the demand for gold trading would reduce. Due to this reason, it impacted the liquidity of the investment sectors.
Affecting the various sectors
The impact of gold also affected various sectors.
- Unorganized sector
People imported 30 tonnes of gold out of 700 to 800 tonnes illegally. Throughout the Middle East, it comprises various unorganized sectors, and after the hike in the import rate of gold, it leads to a lot of smuggling of gold, unlike before. It is why various merchant associations ask the government to reduce the import duty on gold items. But due to the regime of Goods and Service Tax, the seller tends to reduce every transaction. It improves accountability and authenticity to a great extent.
- Organized sector
In the current scenario, 30% of the sector is organized. The impact of GST on gold on these organized sectors increases accountability and transparency. It might also have the opposite effect. Due to the high rate of gold, it leads to various incidents of smuggling the item or selling gold without a bill.
Affecting the making charge
In the previous time in the gold industry, the making charge was fixed at 12th per cent. It came up with an additional 12% charge charged as the custom. Moreover, with the Goods and Service Tax intervention, the cost of making off the gold pieces of jewellery was set up at 18%. After a lot of criticism of this decision, it reduced the rate to 5%. Due to this reason, the gold industry did not experience any kind of effect except for the unorganized sectors and the import of gold.
As the economy recovers from the effect of the covid-19 in a slow-motion, the demand for the gold also raised during the first quarter of the Year. In total, the consumer demand for gold, including coins, jewellery and bars, went up by 37.4%. However, the changes in the Goods and Service Tax and the increase in the price of gold dampened the whole demand for gold. However, with Goods and Service Tax escalating, the purchase of gold jewellery accrued 5% GST on gold and 20% on the jewellery-making charges.
One must be very careful as GST on gold gets affected due to the market fluctuations. In this article, we will intervene on how GST tax payment impacts the gold rate in the economy.
Also, it is not unknown that the price of this valuable metal got affected due to the implementation of the Goods and Service Tax.