How To Calculate GST On Gold Purchases

To calculate GST on gold purchases in India under the GST regime, the applicable tax rates and method of computation are derived from the GST legal framework. Below is the explanation based strictly on legal provisions, including relevant rates and rules.

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🔸 Applicable GST Rates on Gold:

1. Gold (as a commodity) – 3% GST
   • Notified under Notification No. 1/2017-Central Tax (Rate), dated 28.06.2017 (as amended).
   • Applies to sale of gold including gold jewellery.
2. Making Charges (if shown separately) – 5% GST
   • This is treated as a supply of service and attracts GST under Notification No. 11/2017-Central Tax (Rate).

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🔸 Legal Provisions Applicable:

• Section 9(1) of the CGST Act, 2017: Specifies levy of GST on intra-state supplies of goods and services.
• Section 15 of CGST Act, 2017: Deals with valuation — includes any incidental expenses like making charges charged by the supplier.
• Rule 33 of CGST Rules (applicable only if supplier acts as a pure agent; not relevant in usual gold sale transactions).
• Composite Supply (Section 8): If making charges are not shown separately, the entire value is taxed at 3% as it will be treated as supply of gold (principal supply).

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🔸 How to Calculate GST on Gold Purchase:

Scenario 1: Making Charges are Separate (Composite Supply not applicable)
If a jeweller issues an invoice as follows:

• Gold Rate: ₹4,000/gram
• Weight: 25 grams
• Making Charges: ₹10,000 (i.e., 10% of gold value)

Computation:

Particulars	Amount (₹)
Gold Price (4,000 × 25g)	1,00,000
GST on Gold @ 3%	3,000
Making Charges	10,000
GST on Making @ 5%	500
Total Invoice Value	1,13,500

Note: Two separate entries of GST are shown — one for goods (gold) and one for services (making).

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Scenario 2: Making Charges are Not Shown Separately
If the invoice shows a single price (say ₹1,10,000 for gold jewellery without breakdown), then the entire value is taxed at 3%:

• GST = ₹1,10,000 × 3% = ₹3,300

This is treated as a composite supply where principal supply is gold, and tax rate of 3% is applied on total value per Section 8 of CGST Act.

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🔸 No GST on Exchange of Old Gold

If a person sells old gold and uses the proceeds to buy new jewellery, it is treated as a second-hand goods transaction, and GST is not applicable on the sale of old gold by individual (not in business). This is supported by general exemption principles and absence of supply under Section 7 read with Schedule I.

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📌 Summary Table

Component	Rate	Notes
Gold purchase	3%	On value of gold only
Making charges	5%	Only if charged separately
Old gold exchange	NIL	No GST when sold by individual (non-business)